Spain Bank Stress Tests Show Capital Need of $59.3 Bln

Author: Market News International | Category: News

MADRID (MNI) – Stress tests of 14 major Spanish banking groups,
conducted by an independent auditor, showed that half of them will need
an aggregate total of E59.3 billion to shore up their balance sheets,
The Spanish Economy Ministry said Friday.

The ministry said the other seven banks, accounting for 62% of the
Spanish banking system, did not need any additional capital. That group
includes Spain’s two largest banks, Grupo Santander and BBVA, which were
given high grades for being very well capitalized even in the event of
far worse-than-expected economic conditions, for which all the banks
were tested.

However, the capital-deficient banks, pummeled by real-estate
related losses, showed large capital needs. Bankia, the nationalized
lender that has posted huge losses, will require almost half of the
total, the tests showed.

Spanish officials were upbeat about the overall condition of the
Spanish banking sector following the release of the survey, which was
conducted by Oliver Wyman, an international consulting firm.

“The bulk of the Spanish financial system is solid,” Fernando
Jimenez La Torre, secretary of state for the economy, told a press
conference here. “This study should dissipate doubts about the banking
system and avoid contagion between bad banks and good ones.”

The stress test results confirmed recent government assertions that
Spain will need far less than the E100 billion that Madrid’s Eurozone
partners approved for its bank bailout in July. And the banks will
probably not need public aid to cover the entire shortfall, since some
of them can probably raise capital through other means.

The Bank of Spain noted in a written statement that “the capital
needs identified in the exercise do not represent the final figure of
state aid to banks. This aid may be significantly less.”

The European Commission said in a statement that the tests were a
major step “towards strengthening the viability of and confidence” in
the Spanish banking system.

Banks with identified capital shortfalls will have to present
recapitalization and restructuring plans to Spanish and European
authorites by next month. Once the plans have been approved, the first
recapitalizations can take place starting in November.

“If we consider an entity not to be viable, it will get public aid
and then will be sold,” Fernando Restoy, Bank of Spain Deputy Governor
told the press conference.

The European Central Bank said in a statement that it “strongly
supports the Spanish authorities’ plans to ensure that capital needs are
met in a timely manner.”

The tests showed that Bankia would need E24.7 billion under a
“stressed scenario,” which envisages a 6.5% plunge in GDP between now
and the end of2014. Bankia has already requested a E19 billion bailout.

Other banks requiring capital under the stressed scenario include
Catalunyabank, with a need of E10.8 billion, NCG Banco, with a need of
E7.2 billion and Banco de Valencia, with a need of E3.5 billion.

The Bank of Spain said that with mergers that are already underway
and some yet-unrealized fiscal assets, the total capital need of Spain’s
banks was reduced to E53.745 billion.

La Torre said Spain would request E40 billion from Brussels, and he
noted that “this money cannot be earmarked for any other purpose.”

Eurogroup President Jean-Claude Juncker said in a statement that
the stress-test results showed “the total financial assistance agreed in
July should be more than adequate to cover the final capital needs,
including a comfortable safety margin.”

–Paris newsroom, 33142715540; jduffy@marketnews.com

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