The European Commission has approved Spain’s plan to restructure its four nationalised banks, giving them access to €37 billion in EU funds and requiring them to reduce their operations by 60 per cent over the next five years.
The plan is part of a European bailout package that Spain originally requested for its financial sector in June, after the weight of toxic assets from the country’s burst real estate bubble unleashed a financial crisis.
Under the scheme approved yesterday, the lenders will be required to transfer €45 billion of these property assets to Sareb, Spain’s bad bank, at an average discount of 63 per cent.
Of the funds made available, nearly €18 billion will go to BFA-Bankia, Spain’s fourth-largest lender, which was part-nationalised in May.
Catalunya Banc will receive €9 billion and Novagalicia €5.4 billion. Both lenders must be sold off or closed down by 2017.
Banco de Valencia is to receive a capital injection of €4.5 billion, but will be sold to fellow lender Caixabank for a nominal fee of €1.
A further €5 billion is due to be released for privately held banks with capital needs and Brussels is scheduled to rule on their restructuring plan in December.
An audit by Oliver Wyman estimated that Spanish banks would require about €60 billion in extra capital in a worst-case scenario although as things stand only about€42 billion will actually be requested.
On announcing Brussels’s approval of the plan, European Competition Commissioner Joaquín Almunia said it is part of the EC’s aim to “re-establish the viability of banks that receive help so that they can operate on their own in the future.”
Shortly after Mr Almunia’s announcement, BFA-Bankia revealed that it will cut 6,000 jobs over the next four years, as it seeks to meet EU conditions. The bank currently employs around 20,500 people.
