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Spain to raise over 30 bln eur to boost banks

Source: Reuters - Thu 20th Jan 2011

Spain is planning to raise more than 30 billion euros for a fresh recapitalisation of its troubled savings banks, the Wall Street Journal reported on Thursday, citing sources familiar with the matter.

The banks need further capital, beyond 11 billion euros already raised, but not the levels cited by the report, an economy ministry spokeswoman said, reiterating comments by the minister earlier this week.

The government has made soft loans available to the sector through its restructuring fund (FROB), which would have to go to the markets to raise more money if the banks need more cash.

The governor of the Bank of Spain said in December the banks would not need to turn to the FROB this year.

The unlisted savings banks, which account for around half Spain's financial system and have been badly hit by a burst property bubble, are at the heart of concerns about the stability of the country's finances.

Spain's borrowing costs have soared over the past year and it has been under intense scrutiny by markets since Ireland was forced to take a 85 billion euro aid package from the European Union and International Monetary Fund at the end of last year.

A significant part of that rescue fund was ringfenced to prop up its banks.

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