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Banco Base to turn to FROB

Thu 24th Mar 2011

Spain's Banco Base is expected to become the first Caja to be semi-nationalised in the restructuring process of the regional savings banks. As the September deadline for reaching core capital ratios approaches, it could be that more cajas come foreard to become a public bank as well.

Yesterday the Wall Street Journal reported how Banco Base may look towards FROB (Fund for Orderly Bank Restructuring) capital as a means of covering the tier 1 capital gap as their first option.

It is expected that other recently merged Cajas will take a similar approach as a means of strengthen their financial status.

Caja España & Caja Duero have chosen a different approach, choosing instead to merge with larger and better capitalized Unicaja, who currently holds one of the strongest core capital ratios in Spain's banking industries.

The likes of Caja Madrid & Bancaja, will need to sell non-core assets and launch an IPO over the coming months. They will first need to make the Spanish central bank comfortable with their viability plans, which must be submitted before Monday of next week. They must also put their plan into action before the end of September - if they fail, they will also be semi-nationalised.

40% of the capital held by Spain's Cajas could end in hands of the FROB in the process, if they fail to gain confidence from the markets.

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