Friday

18th Aug 2017

Commission backs latest tranche of €39 billion Spanish bank rescue

  • Spain's banking sector needs a €39 billion taxpayer bail-out. (Photo: Carlos Blanco)

The taxpayer-backed rescue plans for four more Spanish banks have been approved by the European Commission.

In a report released on Thursday (19 December), the EU executive said that plans for BMN, Caja3, Banco CEISS and Liberbank complied with EU state-aid rules.

Thank you for reading EUobserver!

Subscribe now and get 40% off for an annual subscription. Sale ends soon.

  1. €90 per year. Use discount code EUOBS40%
  2. or €15 per month
  3. Cancel anytime

EUobserver is an independent, not-for-profit news organization that publishes daily news reports, analysis, and investigations from Brussels and the EU member states. We are an indispensable news source for anyone who wants to know what is going on in the EU.

We are mainly funded by advertising and subscription revenues. As advertising revenues are falling fast, we depend on subscription revenues to support our journalism.

For group, corporate or student subscriptions, please contact us. See also our full Terms of Use.

If you already have an account click here to login.

The Spanish government has pumped in over €1.8 billion into the four banks representing less than 30 percent of the €6.2 billion capital shortfall identified in the stress tests carried out in September by the management consultancy Oliver Wyman.

The rest will be covered by shareholders' losses, asset sales and the transfer of bad debts and loans to the asset management company set up as a 'bad bank' by the Spanish government.

The cash will then be transferred from the eurozone bail-out fund, the European Stability Mechanism (ESM), into the Spanish Fund for Orderly Bank Restructuring (FROB) to recapitalize the banks. The Spanish government will then sell Banco and re-privatise both BMN and Liberbank. Caja3, meanwhile, will be taken-over by its rival Ibercaja.

In a statement, Competition Commissioner Joaquin Almunia said that "the restructuring plans will make these banks viable again, thereby contributing to restoring a healthy financial sector in Spain, while minimising the burden for the taxpayer".

Under the terms of the deal, the banks will be required to get out of the real estate market and return to conventional retail banking and small business lending. Dividend payments to shareholders will be banned.

They will also be expected to push through a plan of job cuts and spending reduction to "improve their cost base, by cutting on average about 30 percent of both staff and branches".

The banks are classified by the Commission under "Group one" heading of banks requiring government subsidies to cover their losses.

The terms of their aid agreement are less harsh than those faced by the "Group two" banks. Bankia, which holds over 10 percent of the deposits of Spanish savers, CatalunyaBanc, NCG Banco, Banco de Valencia, all of which have already been nationalised by the Spanish government.

Meanwhile, the EU executive claims that the total taxpayer funded bailout will, at €39 billion, be lower than the €57 billion shortfall in the September stress-tests. The additional money will be made up through €12 billion worth of shareholder losses, divestments, and by transferring devalued assets into the 'bad bank'.

Analysis

Spain's bailout dilemma: not if, but when and how

Markets rallied on Tuesday when two German lawmakers suggested Berlin is warming to the idea of a Spanish bailout. But the wait-and-see game in Madrid is likely to take a few weeks longer.

Airbnb too 'different' to pay EU tax

US home rental firm said its “model is unique” because most of the money stays in pockets of local people, as France and Germany prepare EU tax crackdown.

EU cautious with German diesel plan

The European Commission welcomed the German carmakers' pledge to update software in diesel cars, but is waiting for details on how emissions will be reduced.

News in Brief

  1. Mixed Irish reactions to post-Brexit border proposal
  2. European Union returns to 2 percent growth
  3. Russian power most feared in Europe
  4. Ireland continues to refuse €13 billion in back taxes from Apple
  5. UK unemployment lowest since 1975
  6. Europe facing 'explosive cocktail' in its backyard, report warns
  7. Danish police to investigate misuse of EU fishing rules
  8. German constitutional court questions ECB's €2tn spending

Stakeholders' Highlights

  1. European Healthy Lifestyle AllianceDoes Genetics Explain Why So Few of Us Have an Ideal Cardiovascular Health?
  2. EU2017EEFuture-Themed Digital Painting Competition Welcomes Artists - Deadline 31 Aug
  3. ACCABusinesses Must Grip Ethics and Trust in the Digital Age
  4. European Jewish CongressEJC Welcomes European Court of Justice's Decision to Keep Hamas on Terror List
  5. UNICEFReport: Children on the Move From Africa Do Not First Aim to Go to Europe
  6. Centre Maurits CoppietersWe Need Democratic and Transparent Free Trade Agreements Says MEP Jordi Solé
  7. Counter BalanceOut for Summer, Ep. 2: EIB Promoting Development in Egypt - At What Cost?
  8. EU2017EELocal Leaders Push for Local and Regional Targets to Address Climate Change
  9. European Healthy Lifestyle AllianceMore Women Than Men Have Died From Heart Disease in Past 30 Years
  10. European Jewish CongressJean-Marie Le Pen Faces Trial for Oven Comments About Jewish Singer
  11. ACCAAnnounces Belt & Road Research at Shanghai Conference
  12. ECPAFood Waste in the Field Can Double Without Crop Protection. #WithOrWithout #Pesticides