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Spain's Novacaixagalicia bank to seek state funds

Source: Reuters - Thu 24th Mar 2011

Spain's Novacaixagalicia bank will become the first of the newly merged savings banks to seek state capital as part of its restructuring process, the regional Galician government said on Wednesday.

Spain's indebted savings banks are seen as a key problem facing the country and they have been forced to raise capital to meet new central bank standards, either by raising private capital or accessing a bank restructuring fund. The Bank of Spain estimates its banks will need at least an additional 15 billion euros.

The government of the north-western region added in a statement that the newly merged bank, on whose board it sits, would publish in full its plans to raise capital on Thursday. It did not specify how much the bank would request from the central bank's fund (FROB) set up to oversee the restructuring of Spain's indebted savings banks.

Separately, Basque savings banks BBK, Kutxa and Vital announced plans late on Wednesday to merge. A statement to Spain's market regulator said plans would be published when a final agreement was reached. Together they would represent around 3% of the Spanish banking system, according to Bank of Spain data.

Novacaixagalicia, which was formed after the merger of savings banks CaixaNova and CaixaGalicia, has already said it will need to raise 2.6 billion euros in fresh capital. By requesting money from the FROB the central government will end up being a shareholder in the bank for up to five years.

It is as yet unclear whether the bank would seek to go public in order to raise private capital, or make a private placement.

Spain's savings banks have until March 28 to present recapitalisation plans to the central bank.

Novacaixagalicia accounts for close to 3% of Spain's banking system, according to the central bank.

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