Tuesday

13th Apr 2021

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.

Read and decide

Join EUobserver today

Become an expert on Europe

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

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.

News in Brief

  1. Putin refuses to talk about military build-up, Ukraine says
  2. EU bank to help Greece manage corona-recovery funds
  3. Johnson & Johnson vaccine deliveries to EU begin
  4. EU sanctions commander of Iran's Revolutionary Guard
  5. UK opens investigation into ex-PM Cameron lobbying
  6. 'Significant differences' in EU-UK talks on Northern Ireland
  7. Bulgarian PM reveals price rise in new EU-BioNTech deal
  8. Biden sending envoy to Brussels

Vietnam jails journalist critical of EU trade deal

A journalist who had demanded the EU postpone its trade deal with Vietnam until human rights improved has been sentenced to 15 years in jail. The EU Commission says it first needs to conduct a detailed analysis before responding.

Stakeholders' Highlights

  1. Nordic Council of MinistersDigitalisation can help us pick up the green pace
  2. Nordic Council of MinistersCOVID19 is a wake-up call in the fight against antibiotic resistance
  3. Nordic Council of MinistersThe Nordic Region can and should play a leading role in Europe’s digital development
  4. Nordic Council of MinistersNordic Council to host EU webinars on energy, digitalisation and antibiotic resistance
  5. UNESDAEU Code of Conduct can showcase PPPs delivering healthier more sustainable society
  6. Nordic Council of MinistersWomen benefit in the digitalised labour market

Latest News

  1. How the pandemic became an EU goldmine for crime
  2. China responds to 'low-efficacy' vaccine fears
  3. Merkel party chiefs support Laschet's chancellor bid
  4. EU refuses to bail out Montenegro's China loan
  5. Industry lobby to 'co-decide' on nearly €10bn EU public money
  6. Why Ursula von der Leyen won't go
  7. Incorporating gender in trade policy to benefit all
  8. Does Italian regionalism actually work?

Join EUobserver

Support quality EU news

Join us