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Spain to profit financially from holding stakes in Cajas

Mon 31st Jan 2011

Spain's Prime Minister has said how the country should benefit financially by holding a percentage of cajas that require extra capital.

The regional savings banks, or 'cajas', must obtain funds from investors to meet the country's new core capital requirements by September, though it is very likely that a few of them will not be able to do this, according to a television interview that Zapatero gave earlier today. The state's bank-rescue fund, othewise known as 'the fund for orderly bank restructuring' - or simply 'FROB', will buy shares in those cajas which are unable to raise capital and will later sell the stock to private investors, he said.

"There's no reason for the public sector to lose money," he commented. "In fact it is foreseeable that it will earn money."

Just last week Spain set a deadline of Spetember for cajas to increase their ratios of core capital from 6% to 8%, increaseing to as much as 10% for closely held cajas. The government, facing a rise in its borrowing costs, drafted the new rules as part of its attempts to convince investors that shoring up struggling savings banks won't overburden public finances.

The FROB fund will purchase shares in the cajas at competive valuations so as not to devalue them or have an impact on the overall budget deficit, El Pais newspaper quoted Deputy Finance Minister Carlos Ocana as saying today.

Only last week Elena Salgado, Spain's finance minister estimated that cajas requireno more than 20 billion euros in order to acheive these new levels, and "all or part" of that will come from private sources. Amongst one of the first cajas to respond to this move was Barcelona's 'La Caixa' , who stated on Friday how it will turn its investment holding company, Criteria CaixaCorp SA, into a listed bank stripped of foreclosed real-estate assets.

In further news today, a group of 7 other cajas led by Caja Madrid reported that it will pool its retail-banking businesses into a single commercial lender. Unnim, another grouping of cajas from the northern region of Catalonia, also agreed to start the process of creating a commercial bank.

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