Bank of Spain takes CAM on board

 

The Bank of Spain has announced their decision to take over Caja de Ahorros del Mediterraneo as a part of their plans to reform the country's banking sector, and in particular the cajas.

FROB - or, the Fund for Orderly Bank Restructure - will take over the management of CAM by investing €2.8 billion of new capital and extend a €3 billion line of credit to the Caja in preparation for selling it on to another institution.

"As a result, creditors and depositors can be completely at ease," the Bank of Spain said in a statement.

The Banks had previously requested the same sum from the fund so that they could meet new minimum solvency requirements set by industry regulators earlier in the year, which meant that the FROB would have to partly nationalise the bank. However, the move by the Bank of Spain perhaps indicates that CAM is no longer a viable stand-alone entity, and that it can only survive by being absorbed by a larger and more solvent institution.

A significant point the caja restructuring process was reached last week when Bankia and Banca Civica were able to raise funds in their IPO's. A couple of other cajas are in advanced talks to plug their capital holes either through mergers or stake sales.

Once the takeover of CAM Bank has taken place, the central bank will have to give consideration to the other cajas which have requested money from the FROB: CatalunyaCaixa, Unnim and Novacaixagalicia.

CAM Bank is Spain's tenth-largest lender, holding 2.8% of the country's loans, and has been a big lender to developers along Spain's Mediterranean coast, worst hit by the housing crisis.