The Spanish State to control savings banks Unnim and CatalunyaCaixa
After not having found the needed private investors to meet the required levels of core capital, the Bank of Spain’s Governor announced that the Spanish State would intervene in four savings banks, including two from Catalonia. The State will control 100% of Unnim and 90% of CatalunyaCaixa. Once the banks are streamlined, private investors will be offered shares. The European Commission has authorised the operation. Now, all Spain’s banks and savings banks have at least 8% core capital. Considering the global banking sector restructuring in Spain, the Spanish State has spent 19,000 million euros from the public finances.
Madrid (ACN).- The savings banks Unnim and CatalunyaCaixa will be intervened by the Spanish State. The Spanish Fund for Orderly Bank Restructuring (FROB) will get the control of 100% of Unnim and 90% of CatalunyaCaixa, according to the Bank of Spain’s Governor, Miguel Ángel Fernández Ordóñez. The day the Spanish banks had to meet the deadline to obtain the required levels of core capital, Fernández Ordóñez announced on Friday in Madrid that the FROB would intervene in four savings banks: Unnim, CatalunyaCaixa, Caja de Ahorros del Mediterráneo (CAM), and Nova Caixa Galicia. In the last number of months, many rumours had already anticipated that Unnim and CatalunyaCaixa would have to finally be rescued by the FROB. The European Commission has temporarily approved the operation regarding Unnim, CatalunyaCaixa and Nova Caixa Galicia. It is waiting to analyse all the detailed information and to see if the rescued banks have a long-term restructuring plan. Despite Unnim and CatalunyaCaixa being now controlled by the FROB, the Catalan Finance Minister, Andreu Mas-Colell, stressed that both financial institutions are still Catalan banks. Taking into account all the interventions, the FROB would have spent 19 billion euros from public finances. The FROB was created by the Spanish Government and the Bank of Spain with public money to assist banks and private banks in restructuring the sector. Fernández Ordóñez stressed that out of the 113 financial institutions analysed in Spain, only 13 did not meet with FROB requirements and needed some degree of intervention. Fernández Ordóñez stressed that after the FROB intervention, now all Spain’s banks and savings banks have at least an 8% of core capital.
These two savings banks had problems to reach the required minimum levels of core capital, as they had an initial lack of core capital and particular vulnerability considering the risk they took with loans during the real estate boom. Investors were not particularly interested in capitalising these banks, considering the general financial crisis and Spain’s construction crisis. Unnim and CatalunyaCaixa were trying to get the funds from final investors, but in the end the FROB is their only option.
The Catalan Finance Minister has outlined that, despite the FROB intervention, both Banks are still Catalan. The Catalan Finance Minister, Andreu Mas-Colell pointed out that the money from the FROB is “public and belongs to everybody" and “also of the Catalan people”. Mas-Colell stressed that despite the intervention of FROB, Unnim and CatalunyaCaixa are based in Catalonia and therefore are still Catalan. He explained that nowadays corporations have shareholders from many geographic origins, and that the most important thing is where the company is based.
All Spanish banks and savings banks have now reached the required core capital levels
The FROB would have spent 19,000 million euros in all banking sector restructuring. However, Fernández Ordóñez stressed that all Spanish banks now have at least a core capital of 8% and savings banks have 10%. Therefore, Spanish financial institutions have fulfilled Basel III requirements. The only two exceptions are Banca Mare Nostrum and Liberbank, which have 25 additional days to find the needed investors to reach the required 10%.
In addition, Ordóñez said that the resources allocated for restructuring the sector “may seem like a lot of money for a citizen, but it is a relatively low amount” considering the global financial situation and the sector’s situation when the crisis started. For instance, Germany already spent 310 billion euros, two thirds of this money to save the Hypo Bank; the United Kingdom spent, 210 billion euros; and the Netherlands, 79 billion euros, 10 billion of which was for ING. Spain would have spent 19 billion euros at this stage. “The evaluation is positive taking into account we have gone through the worst crisis in the last 70 years”, said Ordóñez.
From the 13 financial institutions that needed to increase their core capital, four have gone for corporate operations and capitalisation processes of their matrix entities. Two others have started trading on the stock exchange market to find additional capital, Bankia and Banca Cívica. Two others decided to get private investors, Banca Mare Nostrum and Liberbank. Another savings bank, Caja EspañaDuero, merged with another bank. Finally, the Caja de Ahorros del Mediterráneo (CAM) is in a relocation process after the severe intervention of the Bank of Spain, which replaced the board and put capital through the FROB. The other three savings banks intervened by the FROB are in a much better situation than the CAM, Ordóñez admitted. They are Unnim (with a 100% intervention), CatalunyaCaixa (90%) and Nova Caixa Galicia (93%).
Unnim got 568 million euros from the FROB, which will be added to the 380 million euros it received with convertible preference shares. CatalunyaCaixa received 1.718 billion euros from the FROB. In this latter case, they are added to the 1.25 billion euros it already received from the FROB in 2010.
When Ordóñez was asked if new interventions were possible, the Bank of Spain’s Governor said the they do not "exclude anything in the next 15 years”, but he said that nothing is planned on the short-term.