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EU approves US$48b in bailout to 4 Spain banks
Source: Agencies |
November 29, 2012, Thursday
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Print Edition
EUROPEAN Union authorities have approved the payment of 37 billion euros (US$47.96 billion) in bailout loans to four of Spain's struggling banks provided each of them cut their loans and investments by 60 percent.
The plan cleared yesterday by the EU Commission in Brussels will see Bankia getting 18 billion euros, Catalunya Caixa 9 billion, Novagalicia 5.5 billion and Valencia Bank 4.5 billion.
The 37 billion euros is part of a 100 billion-euro credit line approved by the other 16 EU countries that use the euro to shore up banks hit by the country's 2008 property market collapse.
The aim was to restore the viability of the banks, said Joaquin Almunia, the commission's vice president.
Under the plan, the four banks must exit from lending to real estate development, limit their presence in wholesale business and concentrate on retail loans and those to small and medium-sized companies in their base regions.
They will have to reduce their branch number by 50 percent. Catalunya Caixa and Novagalicia will have to be sold by 2017 or liquidated.
The banks are also expected to move 45 billion euros of their assets to Spain's recently set-up bad bank, SAREB, a fund that aims to buy and turn around soured investments.
In a press conference in Madrid, Bankia president Jose Ignacio Goirigolzarri said the restructuring plan would involve shedding some 6,000 employees before 2015 and closing some 1,100 branches.
Bankia, once one of Spain's top banks, said it expected to end the year with losses of 19 billion euros and return to profit in 2013.
Spain, whose economy is in the middle of its second recession in three years and struggling with 25 percent unemployment, has been battling to avoid seeking a bailout for its government finances. Public finances have been hurt by the costs of rescuing banks as well as the costs of the economic turmoil in the form of lower tax revenues and higher costs to support the jobless.
In September, an independent audit commissioned by Spain estimated that the country's troubled banks would need 60 billion euros to survive a serious economic downturn.
The plan cleared yesterday by the EU Commission in Brussels will see Bankia getting 18 billion euros, Catalunya Caixa 9 billion, Novagalicia 5.5 billion and Valencia Bank 4.5 billion.
The 37 billion euros is part of a 100 billion-euro credit line approved by the other 16 EU countries that use the euro to shore up banks hit by the country's 2008 property market collapse.
The aim was to restore the viability of the banks, said Joaquin Almunia, the commission's vice president.
Under the plan, the four banks must exit from lending to real estate development, limit their presence in wholesale business and concentrate on retail loans and those to small and medium-sized companies in their base regions.
They will have to reduce their branch number by 50 percent. Catalunya Caixa and Novagalicia will have to be sold by 2017 or liquidated.
The banks are also expected to move 45 billion euros of their assets to Spain's recently set-up bad bank, SAREB, a fund that aims to buy and turn around soured investments.
In a press conference in Madrid, Bankia president Jose Ignacio Goirigolzarri said the restructuring plan would involve shedding some 6,000 employees before 2015 and closing some 1,100 branches.
Bankia, once one of Spain's top banks, said it expected to end the year with losses of 19 billion euros and return to profit in 2013.
Spain, whose economy is in the middle of its second recession in three years and struggling with 25 percent unemployment, has been battling to avoid seeking a bailout for its government finances. Public finances have been hurt by the costs of rescuing banks as well as the costs of the economic turmoil in the form of lower tax revenues and higher costs to support the jobless.
In September, an independent audit commissioned by Spain estimated that the country's troubled banks would need 60 billion euros to survive a serious economic downturn.
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