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Europe

Spain's struggling banks may need EUR62 billion

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Text by News Wires

Latest update : 2012-06-21

Independent auditors have calculated that Spain's struggling banking system could need as much as EUR62 billion to survive a worst-case scenario, less than the EUR100 billion lifeline eurozone countries offered.

AFP - Spanish Prime Minister Mariano Rajoy welcomed Thursday results of two audits of its stricken banks, but said European funds were needed "as soon as possible" to help in their recapitalization.

Rajoy was speaking in Sao Paulo after Spain released the results of audits finding that the country's crisis-torn banks need up to 62 billion euros ($78 billion) to survive a severe financial slump, well within the scope of a vast eurozone rescue loan.

The results "reduce the capital needs to manageable margins and ensure that the financial assistance being made available to Spain by our European partners is more than enough," Rajoy said.

He repeated his "wish" that the assistance be "adopted as soon as possible."

In their independent audits, German firm Roland Berger and US company Oliver Wyman found that the banks would need 51-62 billion euros in extra capital in a "stressed" outcome of a slumping economy and real estate sector. In a baseline case, they would need just 16-26 billion euros.

"These results confirm that the actions taken so far by the government were necessary and that the estimates in terms of provision and recapitalization were correct," Rajoy said during a meeting with company chiefs.

The release came just days before Spain was due to formally request a loan from a credit line of up to 100 billion euros offered by the eurozone for Spanish banks hammered by a 2008 property market crash.

A second, more detailed study to be carried out by Deloitte, KPMG, PwC and Ernst & Young, is to look at the valuation of banking assets, with a global figure due for release July 31 and a full breakdown due in September.

The audits, a key stage in the costly restructuring of Spanish banks brought on by the 2008 slump, were released at a time when Spain is under intense scrutiny by global financial markets.

Rajoy said the process Spain faces to overcome the crisis "is neither easy nor nice, but the government that I head is determined to carry it out without hesitation."

"I am well aware of the great sacrifice I am asking for, and have to keep asking from our employers and all citizens, but I believe our efforts will not be in vain," he said.

Rajoy met with Spanish businessmen with investments in Brazil at the offices of the powerful FIESP industry federation, where he noted that bilateral trade exceeded $6 billion last year, a record.

 

Date created : 2012-06-21

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