Madrid urges banks to find private capital

28th January 2011, Comments 0 comments

Economy Minister Elena Salgado pressed Spain's banks to attract private capital if they want to avoid part nationalization, the leading daily El Pais said Friday.

Salgado this week announced new rules on the level of rock-solid core capital -- equity capital and retained earnings -- that the banks must have on their balance sheets.

Spanish lenders will have to have a core capital level equal to 8.0 percent of total assets by September, even higher than the 7.0 percent required under tough new, international "Basel III" rules agreed last year.

And the state-backed Fund for Orderly Bank Restructuring, or FROB, will step in to take temporary stakes in those savings banks that do not meet the new requirements by then.

"If I were a financial institution I would prefer not to have not to have to resort to the FROB; that would mean accepting a restructuring plan," Salgado said in an interview with El Pais.

"It is always better to go to the private sector for financing. That is one of the goals of the reform," she said.

The FROB raised 3.0 billion euros ($4.1 billion) with a three-year bond issue on Thursday in case it needs to inject more capital into savings banks, which received about 12 billion euros in 2010.

© 2011 AFP

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