Reform of Spanish savings Banks

Yesterday the Minster for the Economy, Elena Salgado, announced that the government would be increasing the minimum level of capital required from 6% to 8% under the planned reforms of Spanish savings banks. Moreover, savings banks which cannot raise the required level of capital from private investors will be able to obtain capital from FROB, the body set up by the government in order to oversee the restructuring of the sector.

The government estimates that the sector will need to raise around 20,000 million euros in order to meet the new requirements which will be set down by law. Those savings Banks which are not able to raise the required extra capital will receive financial help from FROB. However, in exchange they will be taken over by the government under a partial nationalization scheme. The government will take over the management of these entities which will become banks for a maximum period of five years.

It is not known when the new requirements will become law.

However, a process of negotiation is now underway.

According to Elena Salgado, the objective of these new measures is to restore the confidence of the markets in the Spanish financial system and to eliminate doubts on the solvency of Spanish banks and savings banks aa well as making more credit available to families and businesses.