SPAIN BREAKING….3rd largest savings bank has to call in Madrid Government




Spain’s 3rd largest savings institution Banco Base abandoned plans for a flotation this morning, having been advised that this would not attract the capital required. Instead, it has asked the Spanish Government to urgently supply funds directly.

When Moody’s downgraded the debt of 30 Spanish banks last Thursday, it left untouched the ratings of the country’s three largest banks. The ratings agency said its reasons for the downgrading  included higher pressure on Spanish sovereign debt and ‘many weak banks’.

Now the 3rd largest Spanish savings bank Banco Base says it has asked for €1.45 billion in state funds to meet ‘new local capital requirements’. It is a further sign that some troubled cajas are struggling to attract much-needed private capital….and vindication of the Slog’s view that consolidation of the cajas will only lead to bigger (not fewer) problems. The bank has asked Spain’s Fund for Orderly Bank Restructuring (FROB) for the funds. The deal is expected to involve a straight loan-for-equity swap.

Reuters and Bloomberg report that Spanish banks in general are in need of €15 billion to convince investors that battered balance sheets are not a threat. Slog sources in Spain say the country’s banking industry will need far more investment than most observers yet realise.

All this is a further blow to the eurozone following last week’s hopelessly circular and unproductive summit. A senior US insider specialising in EU finances told The Slog this afternoon:

“Greece and Ireland have no hope of remaining in the eurozone now. We expect Portugal and perhaps Belgium to follow suit. Meanwhile, it’s getting obvious that Spain and Italy’s claims to be bombproof are just more bullshit. The debtor eurozone nations need to repay €650 billion in public debt during 2011, before you even look at personal and commercial debts at astronomical levels. It’ll start hitting the fan during the summer at latest, and be in full swing by the end of the year. There’s no holding it now – the eurozone is finished”.