Investors are braced for fresh turbulence in European bank shares after Spain's authorities stepped in to rescue Cajasur, one of the country's largest regional lenders.
The Telegraph, 23 May 2010
The Bank of Spain intervened over the weekend after merger talks with Unicaja broke down. Cordoba-based Cajasur can draw €550m (£477m) immediately from the state's Fund for Orderly Bank Restructuring. "This will guarantee that it can continue to operate and fulfil its obligations," said the central bank.
The collapse of Cajasur is likely to revive fears over the health of Spanish banks, which skirted the US subprime crisis but are succumbing to local property busts. Cajasur is heavily exposed to second homes on the Costa del Sol, where prices are in free fall. Goldman Sachs said Spain's property companies have debts of €445bn, or 45pc of GDP, mostly owed to savings banks known as cajas. The stock of unsold homes reached 926.000 at the end of last year.
"Banks may not be able to recoup large parts of these loans. These losses will have to be recognised eventually, bringing down many institutions," it said. The bank added that the two giants, Santander and BBVA, are in good health.
The rescue follows a move by the Bank of Italy last week to suspend mark-to-market accounting for eurozone government bonds, thus alleviating strains on banks' capital ratios.
