Merger Creates Spain's 9th Largest Bank

Two Spanish savings banks, Caixa Penedes and Caixa Laietana, have released a joint statement that they have plans to merge, which will create Spain’s ninth-largest savings bank by assets. The merger will create a savings institution in possession of more than 32 billion Euros in assets and a work force in excess of 4’000 in over 900 locations.

Only last week Miguel Fernandez Ordonez – the Governor of the Bank of Spain - was reported as saying that he would like to see a third of the country's 45 savings banks quickly absorbed by stronger institutions, suggesting that this could help the sector which is struggling in the midst of the nation's worst recession in decades.

"I think there are at least 15 institutions that should merge with others. I hope (by) next spring we have restructured all these institutions, that’s my idea. We now have many, many mergers that we are discussing," he told the Financial Times newspaper.

Spanish commercial banks seemed to escape from the subprime mortgage crisis last year, as the country's strict rules meant they did not invest heavily in the high-risk loans that caused the economic chaos in other Countries around the globe. However, some smaller unlisted saving banks – often controlled by regional politicians, were badly hit by the collapse of the country's once-booming property market.

Unlike in other European Countries, no bank in Spain has been formally nationalised as a result of the global credit crisis, but in March the Government placed the regional Caja de Ahorros Castilla La Mancha under special administration. And in June, Spain announced a multi-billion-euro fund to help revive the financial sector by buying stakes in banks hit by the global crisis to get them lending again.

Fernandez Ordonez told the Financial Times he wants to use this Fund for Ordered Bank Restructuring to achieve his aim of multiple mergers.