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Spain plans restructuring of savings banks

Source: Reuters - Sat 15th Jan 2011

Spanish Prime Minister Jose Luis Rodriguez Zapatero has thrown his weight behind what he calls a "a second round" of restructuring of Spain's unlisted savings banks, he told the Financial Times in an interview.

The regional banks, which account for around half of the banking system are central to fears about the stability of the country's finances because of their heavy exposure to Spain's collapsed property sector.

"We are reforming our financial sector and it is the most ambitious, far-reaching reform of that industry over the last 20 years in Spain," he said.

Spain's economy secretary said on Friday the savings banks, or cajas, must boost their capital in order to gain market confidence.

Zapatero stopped short of admitting that the savings banks require large injections of public money but some state contribution would be needed if the government's preferred option of private capital proves insufficient.

"We are absolutely convinced that the restructuring of the Spanish financial system can be done by strengthening the system with private capital and perhaps with very limited recourse to public capital," he said.

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