Spanish savings banks could need up to 24 billion euros

June 7, 2010 by · Leave a Comment
Filed under: Global News 

This news along with debt problems in Hungary is helping to push the Euro to new lows.  Sunday night when the foreign exchange markets opened, the Euro under $1.20.  According to the article, the banks tier 1 capital is below their required 8% equity based on the Citibank analyst Ignacio Moreno.  The reason for the losses is no surprise, real estate.   Spain’s real estate market really heated up during the bubble years and Spain’s banks had a large exposure to those assets.

Market Watch – Spanish Cajas, or savings banks, could need between 24 billion euros ($28.7 billion) and 34 billion euros to restore an 8% equity Tier 1 ratio for each of them, Citi analyst Ignacio Moreno said in a note to clients published Monday, after conducting a stress test of capital and real estate asset quality. As a result, he said that the cajas should undergo “significant changes” in the next few months including mergers, downsizing and, further ahead, potential listings.

Of the 46 cajas existing today, half will disappear, based on the transactions already announced, he noted. More consolidation is likely in the foreseeable future, according to him, partly because the Bank of Spain’s new provisioning policies will lead to faster recognition of real estate-related losses.

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