bank

The Barcelona-based nationalised Catalunya Banc has reached a first deal with unions on the announced mass lay-off. The deal includes voluntary redundancies instead of early retirements, and the possibility for 401 workers over 50 years old to leave the company. The agreement was reached in the early hours of Wednesday morning, after a long day of talks on Tuesday. Catalunya Banc runs the banking business of the nationalised savings bank CatalunyaCaixa, which will be sold in the coming months after a comprehensive restructuring process. Talks are still ongoing in order to close a definitive deal and the definitive agreement has now to be ratified by the bank’s Board.

The Catalan bank was nationalised in 2012 and is going through an important restructuring process before being privatised again. Currently, the financial entity is owned by the FROB (Fund for Orderly Bank Restructuring), which is run by the Bank of Spain and the Spanish Government. The FROB has been delaying the auction to sell CatalunyaBanc and is now proposing to layoff 2,453 workers of the bank and its subsidiaries, according to trade unions. This would represent firing some 34% of its staff. The company is proposing a compensation of 20 days worth of salary per year worked for those it plans to layoff, following the labour market reform, with a maximum of the equivalent to 12 months salary being given. CatalunyaBanc ended the first half of 2013 with a net profit of €183 million, after having transferred part of its real estate toxic assets to the so-called “bad bank” SAREB.

The solvency ratio stood at 10.21% of the bank’s total resources, with 9.77% of core capital. Barcelona-based CatalunyaCaixa closed the first half of 2013 with a net profit of €183 million, which have met targets to recapitalise the bank. The interest margin reached €264 million, which represents a reduction of 5.9% as a result of a credit transfer to the publicly-owned banking management company Sareb. In spite of this, the reduction is less than the average decline seen in the sector as a whole and it has seen a remarkable growth during the first half of 2012 of 14.8%.

By the end of last month, 14,829 fewer people were registered at the Catalan Public Employment Service, which leaves the total number of registered jobseekers at 642,166 individuals. This represents a 2.26% drop compared to the figures from April, meaning that registered unemployment decreased in Catalonia for the last three consecutive months. May is a month when unemployment tends to drop thanks to temporary summer jobs, mostly related to the tourism industry. In the whole of Spain, unemployment decreased by 1.97% in May, with 98,265 fewer people registered as unemployed. This leaves the total number of people registered as being without a job and looking for one at 4,890,928 individuals in Spain. The Catalan Government welcomes “the positive horizon” shown by the May figures but it considered them to be “insufficient” as yet.

The Spanish Constitutional Court has lifted the temporary suspension of the Catalan Government’s tax on total bank deposits while it is waiting to issue a sentence on the measure. The Spanish Government took Catalonia’s tax on bank deposits, the drug prescription fee and the new judicial taxes to the Court. The Constitutional Court accepted Madrid’s appeal in January and temporarily suspended the implementation of the three measures for five months. After the period is over, the Court believes that, taking into account the need to reduce public deficit, the Catalan Government can now implement the tax on banks, while the magistrates agree on a definitive sentence. However, the Court has extended the suspension on the judicial and drug prescription fees.

On Wednesday it became known that the Catalan Banc Sabadell would acquire Banco Gallego from the Spanish Fund for Orderly Banking Restructuring (FROB). However, the details of the operation were still being discussed and no detailed information was disclosed. On Friday, it was stated that the FROB – owned by the Spanish Government and the Bank of Spain – will inject €245 million of public money into Banco Gallego. In exchange, Banc Sabadell will buy the financial entity for the symbolical price of 1 euro but will take care of all the potential future losses.

The offer, presented by Banc Sabadell, has won the tender for the acquisition of Banco Gallego, which was nationalised and owned by the Spanish Fund for Orderly Bank Restructuring (FROB). Banco Gallego was partially owned by Novagalicia Banco, the private bank resulting from Nova Caixa Galicia. The FROB has announced its decision although it also explained that the final details are still “being negotiated”. In the last year and a half, Banc Sabadell has bought the former Caja de Ahorros del Mediterráneo, the business activity of Caixa Penedès (part of Banco Mare Nostrum) and now Banco Gallego.

With the operation, the Barcelona-based bank, has more than 6,000 branches throughout Spain for the first time. CaixaBank, which tops the Spanish retail banking market, acquired Banca Cívica in August, which was the merger of five savings banks: Caja Navarra, Cajasol, Caja Guadalajara, Caja Canarias and Caja Burgos. From now on, all the branches, ATMs, IT systems, accounts and other financial products from all the five previous savings banks will be integrated into CaixaBank’s business. CaixaBank has adapted 1,170 ATMs from Banca Cívica, reaching a total number of 10,000 ATMs distributed throughout Spain.

The Spanish Government is keeping most of the 4.5% public deficit allowed to the entire Spanish public sector in 2013 for itself, despite managing only 50% of the total public spending. It has allowed itself a 3.8% deficit while it has imposed a 0.7% target on the regional governments, which manage almost 40% of the public spending including basic services such as healthcare and education. The European Parliament report indirectly asks Madrid to relax the Autonomous Communities’ deficit targets according to the basic services they provide. In addition, it also states that regional governments should have greater fiscal capacities and depend less on central government transfers. Furthermore, the report asks “some member states” to eliminate the ministries whose powers have been devolved and to “reduce unnecessary defence expenditures”.

The Constitutional Court has accepted the Spanish Government’s appeal against three measures adopted by the Catalan Executive to reduce its deficit, some of them negotiated last spring with the People’s Party (PP). The Spanish Government, which is run by the PP, now believes that these measures invade its own powers, “break market unity” and go against the principle of “equality for all Spaniards”. While accepting the appeal, the Court has temporarily suspended the application of the fees and taxes for a five-month period, which could be extended. The Catalan Government will appeal the decision as it believes the measures to be in line with the Constitution and within its jurisdiction. The drug prescription fee brought in €46 million in its first 6 months and it reduced public spending on medicines.

The Centre-Right Catalan Nationalist Coalition (CiU) and the Left-Wing Catalan Independence Party (ERC) have reached a definitive agreement ensuring the next Catalan Government parliamentary stability to approve the main laws. The CiU leader Artur Mas will be re-elected President of the Catalan Government with the ERC’s vote in the Catalan Parliament by the end of the week. However, the ERC will not sit in the Cabinet and will only offer support on the agreed issues. The last point blocking the agreement was the CiU’s refusal to set a specific date for a self-determination referendum. Finally, they have agreed on calling for a citizen vote on Catalonia’s independence from Spain in 2014. However, the CiU has managed to include a clause postponing the voting call if both parties explicitly agree to do so.

With this decision, the Catalan Government wants “to safeguard” its power to adopt this type of tax or the equivalent revenue, after the Spanish Government announced the creation of its own tax while keeping it at 0% to prevent the Autonomous Communities from approving it. The Constitutional Court has already backed the taxes on bank deposits created by Extremadura, Andalucía and Canarias. Catalonia’s tax will not affect clients but only the banks. It will affect all banks operating in Catalonia, independent of where they are based. In addition, it will have retroactive effects as from the 30th of November. The Spanish Finance Minister warned that the Spanish Government will fully oppose it.

Banc Sabadell and Banco Mare Nostrum have reached a definitive agreement over the transfer of Caixa Penedès’ territorial network and business in Catalonia and Aragon to the Catalan bank. After this has been completed, Banc Sabadell will strengthen its retail banking activity and will have the fourth largest network of branches in Catalonia. The bank will increase its commercial network in Catalonia by 92% and will incorporate 462 branches, 900,000 clients and 2,000 workers. Caixa Penedès was a medium-sized savings bank in Catalonia. In 2010 it took part in a ‘cold merger’ with 3 other Spanish savings banks and in 2011 they created Banco Mare Nostrum.

The Spanish Fund for Orderly Bank Restructuring (FROB), which is run by the Bank of Spain and the Spanish Government, has announced that it will re-start the auction proceedings to sell Catalunya Banc and Banc de València. The selling process was temporarily frozen on the 21st of June, so as to wait for a calmer financial environment. The FROB decided to put the auction on hold, in order to wait for the results of the two independent audits on Spain’s banking system made by Oliver Wyman and Roland Berger. In June, Catalunya Banc’s auction was only pending the final offers by six financial entities to be completed. In September 2011, the FROB took control of Catalunya Banc, which de facto was nationalised.

However, CatalunyaBanc would need a maximum of €10.83 billion in the most stressed scenario. According to the independent audit by Oliver Wyman, with KPGM, Deloitte, PwC and Ernst & Young, the Spanish banking system would need a maximum of €53.75 billion in the worst case scenario. 4 banking groups would concentrate 86% of these additional funds. In total, 7 banking groups would need additional funds, while 7 groups would be strong enough, with their own resources, to resist a hypothetical scenario with a 6.5% recession between 2012 and 2014, 27% unemployment, a 85% drop in land prices and a 55% decrease in housing prices.