Suspending Catalunya Banc sale "Negative" : Moody's

 

Spain's decision to suspend the sale of the nationalized lender Catalunya Banc is negative for the country's banks because it shows a dearth of belief in the clean-up process, Moody's Investors Service said.

Halting the auction "is credit negative for the entire banking system because it can be interpreted as the private- sector's lack of confidence in the success of the restructuring and clean-up of weaker banks," Moody's said in an analysis published today.

Spain's bank rescue fund, known as FROB, said last week it was suspending the sale of Catalunya Banc, which was nationalized in 2011. Spain has spent about €40 billion to bail out lenders including the Barcelona-based bank that were taken over by the state as a property crash inflicted mounting losses on the financial system.

Economy Minister Luis de Guindos said today that there would be "co-ordination of behavior" between state-owned banks including the Bankia group and Catalunya Banc.

The government wants the lenders to grant credit to the economy in a "reasonable way," de Guindos told broadcaster Antena 3 in an interview. He ruled out merging them.

Spain had planned to sell Catalunya Banc by the end of March after a European Commission-approved restructuring plan envisaged recapitalizing it with €9 billion and making it transfer soured assets to a so-called bad bank.

"Despite the broad public support package that Catalunya Banc has received, the FROB so far has not succeeded in finding a buyer for the bank," Moody's said. "The suspension suggests that the private sector is unwilling to acquire the bank without additional support or safeguards against the remaining risks that still may be embedded in the bank's balance sheet."