Spain may need 62 billion euro to rescue banks

Thu Jun 21, 2012 3:43pm EDT
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By Julien Toyer and Jesús Aguado

MADRID (Reuters) - Spain's banks would need 51-62 billion euros ($64-78 billion) in extra capital to weather a serious downturn in the economy, less than a 100-billion-euro aid package offered by the euro zone, independent audits showed on Thursday.

The Spanish government will use the reports by consultancies Roland Berger and Oliver Wyman to determine how much aid it will take to recapitalize its ailing lenders.

Spain said it will make a formal request in the next few days but details on how much each bank will need won't be known until September, leaving analysts with mixed feelings about the capacity of the audit to restore confidence in a sector shut out of international markets.

Doubts about the economy and the banks have moved Spain to the center of a long-running euro zone debt crisis, forcing the Treasury to pay its highest yield since 1997 to sell less than a billion euros of 5-year debt on Thursday.

"The (capital needs) are lower than the amount agreed on with the Eurogroup to give security and confidence to markets, with enough room to carry out the restructuring," Fernando Restoy, deputy governor of the Bank of Spain and head of bank restructuring fund FROB, told a news conference.

The audit said Spain's three biggest banks - Banco Santander, BBVA and Caixabank - would not need extra capital even in a stressed scenario. It said the problems were limited to a small group of Spanish banks on which the state has already started to act.

"Everything seems to indicate that additional capital needs will be concentrated in banks that have already been taken over by the FROB," Restoy said.

Four banks are currently nationalized - Bankia, CatalunyaCaixa, NovaGalicia and Banco de Valencia. Bankia has requested a capital injection from the state of 19 billion euros, while financial sources told Reuters the needs for the three others would top 20 billion euros.   Continued...

A man cleans a window of a bank branch in Madrid June 20, 2012. REUTERS/Andrea Comas