Spain's Cajas Face No Stress Test Shocks: Association

Spain's banks or cajas will get no nasty surprises with the release of stress tests later this week, the director general of the Spanish Confederation of Savings Banks (CECA) said in a newspaper interview on Sunday.

Many analysts have warned that Spain's savings banks could suffer the most when stress tests are published on Friday alongside those for other European banks, given many are heavily exposed to a badly hit property sector.

Yet the CECA's Jose Antonio Olavarrieta, asked if there would be any surprises for Spanish lenders, was quoted as saying by ABC newspaper: "I don't believe there will be, either for the cajas or the banks."

However, he did not discount a bank having to seek more capital from the Bank of Spain's restructuring fund FROB, set up to help a consolidation process among the cajas to halve their numbers from 45 and strengthen the financial position of the weaker ones.

Olavarrieta also said he hoped the tests would help improve conditions in money markets, which have shut out smaller Spanish banks over fears the country could face a similar debt crisis to that of Greece.

"If the tests are positive and confidence is reestablished then there will be more credit and liquidity in the markets" he was quoted saying.

Speaking in a separate interview in La Vanguardia newspaper, the chairman of the CECA and of La Caixa savings bank Isidre Faine also said banks and cajas would not have problems with the stress tests given their clear balance sheets and sufficient mortgage guarantees on the loans they had made.

But he said the sector still had work to do in terms of reducing costs and making more capital provisions.