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Spain sets up fund to help banks

SPAIN'S government yesterday unveiled a fund of up to 90 billion euros (US$125.46 billion) to help banks restructure and cope with the effects of recession.

Finance Minister Elena Salgado told a news conference after a Cabinet meeting that the money will be used for capital injections, to help with mergers and to fund restructuring plans. It will have initial seed capital of 9 billion euros, which can increase to 90 billion euros.

Spain's banking sector has largely weathered the international financial crisis, thanks to strict financial regulations that forced banks to set aside provisions during an economic boom fueled by construction and consumer spending.

But the boom has turned to bust and the economy is now in recession, with many banks saddled with bad loans.

Salgado said banks could be in trouble if the crisis continues. "We think this is a very good time to carry out an orderly process of restructuring our country's financial system, or at least starting it."


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