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Spanish savings bank CAM to ask state for funds

Source: Reuters - Thu 31st Mar 2011

Spanish savings bank Caja Mediterraneo (CAM) said late on Wednesday it would apply for state funds to meet capital requirements following the collapse of a planned merger with three other banks.

Three of the partners in the state-driven Banco Base merger voted against the tie-up on Wednesday, baulking at an association with CAM -- based in the coastal Alicante region which was one of the worst hit during Spain's property crash.

CAM did not say how much it would need from the state restructuring fund (FROB).

A CAM spokesman said on Tuesday Banco Base would apply for a state-backed cash injection of 2.8 billion euros, twice an estimated capital shortfall from the Bank of Spain.

Spain is under intense market pressure to show it will not follow in the footsteps of Ireland and ask for an international bailout, but concerns over the state of its financial system after the property crash have fuelled uncertainty.

The Bank of Spain says the system needs 15 billion euros to lift capital levels to meet strict new requirements aimed at convincing international markets the banks are solvent. Analyst estimates for the capital shortfall in the system, including future losses related to toxic real estate assets and loans, rise to as high as 120 billion euros.

The Bank of Spain has urged the four banks involved in the merger to present alternative restructuring plans after they abandoned the joint project.

The FROB provides funds by buying shares in a bank that applies for state help, partially nationalising the bank.

The state can keep the shares for up to five years, with an option for the savings banks to buy them back within the first two years provided the government makes a profit on the sale.

Spain's unlisted savings banks, known as 'cajas', are undergoing a massive state-driven restructuring as part of government measures to reassure international markets on the stability of the country's financial system.

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