Spain to overhaul rescued banks as condition of aid
By Foo Yun Chee and Sonya Dowsett
BRUSSELS/MADRID (Reuters) - Spain's four nationalized banks will more than halve their balance sheets in five years, cut jobs and impose losses on bondholders in order to receive a euro zone rescue package.
The measures are a condition of 40 billion euros ($52 billion) in aid that offers hope for an end to a banking crisis which has pushed Spain to the brink of a sovereign bailout to keep the government afloat.
The European Commission approved the plans on Wednesday, setting in motion one of the most far-reaching overhauls of any European banking system since the start of a banking crisis in mid-2007 with the near collapse of German lender IKB.
"Our objective is to restore the viability of banks receiving aid so that they are able to function without public support in the future," said European Union Competition Commissioner Joaquin Almunia said.
Bankia, NovaGalicia Banco, also known as NCG Banco, Catalunya Banc, and Banco de Valencia were taken over by the state after unsustainable lending during a decade-long property boom left them dangerously short of capital.
The four banks account for just under a fifth of Spain's banking system. They must transfer 45 billion euros of soured property assets to a so-called 'bad bank' as another condition of receiving aid.
The smallest of the four banks, Banco de Valencia, will be sold to one of Spain's healthiest lenders Caixabank, while the other three banks must cut their balance sheets by more than 60 percent over the next five years.
JOB LOSSES Continued...