Santander may take over troubled savings bank CAM: press

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Spanish banking giant Santander could take over the Caja Mediterraneo (CAM) after the troubled savings bank's planned merger with three others collapsed, Spanish media said Friday.

The CAM decided on Thursday to seek aid from the state-financed Fund for Orderly Bank Restructuring (FROB) in order to meet new banking requirements set by the government after the failure of its merger.

But the business daily El Economista said the Bank of Spain has decided "to launch measures to avoid (public) intervention."

Since the CAM reportedly needs around 2.0 billion euros ($2.8 billion), or the majority of its capital, the public aid would mean its nationalisation.

El Economista said the central bank is planning a "mini-auction" of the CAM for the big Spanish banks, among which Santander, the eurozone's largest bank by market capitalisation, "is the big favorite, followed closely by BBVA," the country's second largest bank.

It has also contacted La Caixa, Banco Sabadell and Banco Popular, the paper reported.

"Santander, which the markets believe is the top candidate to take over the savings bank, would carry out this operation through its (subsidiary) Banesto," it said.

On Wednesday, three savings banks -- Cajastur, Caja de Extremadura and Caja de Cantabria -- rejected the plan to merge with the CAM to create a new group, Banco Base, which would have been the third-largest savings bank in terms of assets.

It was the first broken-off engagement in the savings bank sector since a wave of consolidations in 2010 cut the number of institutions from 45 to just 14.

Spain's lenders, especially regional savings banks which account for about half of all lending in the country, have been heavily exposed to bad debt since the collapse of the property sector at the end of 2008.

The regional savings banks are expected to request more than seven billion euros in public aid to boost levels of rock-solid core capital on their weakened balance sheets.

The Bank of Spain has estimated the entire banking system requires 15.152 billion euros to recapitalise.

The extra money is required to meet stringent new rules on capital levels introduced by the Spanish authorities so as to regain credibility on world financial markets.

© 2011 AFP

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