SPAIN/FILE: Spain says it needs to know how much money is required to recapitalise its banks, before deciding on a bailout request

Record ID: 566435

  • Title: SPAIN/FILE: Spain says it needs to know how much money is required to recapitalise its banks, before deciding on a bailout request
  • Date: 9th June 2012
  • Summary: MADRID, SPAIN (JUNE 8, 2012) (REUTERS) PHOTOGRAPHERS
  • Embargoed: 24th June 2012 13:00
  • Keywords:
  • Location: Spain
  • Country: Spain
  • Topics: International Relations,Economy,Politics
  • Reuters ID: LVAC0G34Y4PPZ2JQE7SPPNW72PHG
  • Story Text: Spain's Deputy Prime Minister Soraya Saenz de Santamaria said on Friday (June 8) the Spanish government needed at least an estimate of the recapitalisation needs of its troubled banks to decide on how to prop them up.
    Saenz de Santamaria spoke at a news conference after the weekly cabinet meeting:
    "At the moment, the International Monetary Fund (IMF) and the independent evaluators are working on the figures that our financial system needs for its recapitalisation. So, I can tell you that the government has to respect the procedures before approaching any decision regarding the figures," Saenz de Santamaria said in response to whether Spain will be requesting a bank bailout from Europe this weekend.
    "Once once we learn what the preliminary reading of what are the needs of the Spanish financial system is, the government will announce its position on this matter."
    Five officials in Brussels and Berlin told Reuters finance ministers of the single currency area would hold a conference call on Saturday (June 9) morning to discuss a Spanish request for aid, although no figure on the assistance has yet been set.
    Saenz said she was not aware of any formal meetings during the weekend.
    "The European authorities have given no indication of any formal meeting at the moment so I cannot tell you whether there will be a meeting or not or give you any dates. At the moment there isn't one scheduled for the upcoming days," she said.
    Fitch Ratings cut Madrid's sovereign credit rating by three notches to BBB from A on Thursday, highlighting the Spanish banking sector's exposure to bad property loans and to contagion from Greece's debt crisis.
    A spokesman for the European Commission said Spain had made no request for aid and would not confirm that a conference call was planned. But added that if Spain did make a request, the euro zone had instruments ready to provide help.
    Saenz de Santamaria said it is a very difficult moment for Spain and the European Union pointing out that the country is making every possible effort to overcome the crisis and its situation has to be seen differently with respect to other Euro members.
    "We have to look at this things objectively. It is a very difficult moment, it is a very difficult moment for Europe. Maybe one of the most complicated moments for the European Union and the countries are suffering. But everything has to be looked at within wider a time frame. Specially with the assurance that Spain is doing all the necessary reforms in order to grow again and to create jobs and confidence is very important for that to happen," she said.
    Spain is expected to request aid from the euro zone's 440 billion euro bailout mechanism, known as the European Financial Stability Facility.
    The amount depends on the results of audits being conducted by the International Monetary Fund and independent assessors.
    Financial industry sources told Reuters on Thursday (June 7) that a report by the IMF, to be handed to Spain on Friday and expected to be made public on Monday (June 10), had estimated Spanish banks' capital needs at a minimum of 40 billion euros ($50.25 billion).
    The euro zone has been under strong pressure from the United States, China, Canada and other major partners to take swift, decisive action to prevent the debt crisis spreading and causing greater damage to the world economy.
    Fitch said the cost to the Spanish state of recapitalising banks stricken by the bursting of a real estate bubble, recession and mass unemployment could be between 60-100 billion euros ($75-$125 billion) - or 6 to 9 percent of Spain's gross domestic product. The higher figure would be in a stress scenario equivalent to Ireland's bank crash.
    The IMF report is expected to provide a range of figures, with 40 billion euros the minimum requirement, rising to around 90 billion euros for a fuller recapitalisation, officials said.
    A separate independent audit of the banking sector, commissioned from consultants Oliver Wyman and Roland Berger, which the government had flagged as crucial, is due on June 21.
    On Friday European shares and the euro fell amid mounting concern over Spain following the Fitch downgrade. Spanish bond yields rose after the steep credit rating cut.
    While Spain would join Greece, Ireland and Portugal in receiving a European financial rescue, officials said the aid would be focused only on its banking sector, without taking the Spanish state out of credit markets.
    That would be crucial to avoid overstraining the euro zone's rescue funds, which would struggle to cover Spanish government borrowing needs for the next three years plus possible additional assistance for Portugal and Ireland.
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