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Nine Spanish Cajas 'may need to turn to FROB'

Source: Bloomberg - Fri 15th Apr 2011

Spain's Bankia and Banca Civica have both stated how they would only turn to FROB as a last resort, and are working to their original plans to carry out initial public offerings.

Bankia, a merger led by Caja Madrid, and Banca Civica anounced seperately today that if their shares sales failed, they would seek out private investors and would only tap the FROB rescue fund as a final option.

The Bank of Spain commentd yesterday how nine possible lenders may turn to the FROB fund, valued at 99 billion-euros, after examining their plans to raise finances to meet new capital requirements.

The Cajas that are planning share sales were asked to detail back-up strategies in case their plan-one failed, according to the latest banking law, which was approved on Feb. 18.

The government revised capital requirements as a move to increase confidence in the economy and its financial system and attract investment. Cajas are still reeling from the effects of the collapse of the property market, which led the central bank to class almost half of their 217 billion euros of lending to the property industry as "potentially problematic."

Caja Espana and Caja Duero, which together have a capital shortfall of 463 million euros, today announced their merger with Unicaja, which already meets the capital requirements. The lenders will create a commercial bank based in Malaga with assets of about 81 billion euros, making it the country's third- largest caja group.

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