A further step towards rescuing the Spanish banking sector is expected to be announced today (20 December). Joaquín Almunia, the European commissioner for competition, is likely to confirm that the Commission has approved state aid for four more banks in need of capital.
The banks are BMN, Liberbank, Caja3, CEISS, whose aggregate capital shortfall was estimated at €6.2 billion in stress tests earlier this year. These banks are judged incapable of securing this capital privately, with the consequent need for state aid.
The banks submitted recapitalisation plans this autumn for approval by the Banco de España and by the European Commission, and the total amount likely to be approved is rather more than €4bn. Once the approval is announced, the money could be made available to the banks within weeks.
The state aid is being funded through the agreement in July to allocate €100bn to the Spanish banking sector, under a memorandum of understanding between eurozone countries and Spain. The Commission's approval will allow the banks to receive aid from the European Stability Mechanism, under strict conditions on reform. As part of the same agreement, the Commission approved at the end of November the restructuring plans and €37bn in state aid for four nationalised banks: BFA/Bankia, NCG Banco, Catalunya Banc and Banco de Valencia.
The Commission aim is to see restoration of the viability of the banks so that they are able to function without public support in the future, and without using more state aid than strictly necessary for restructuring or relapsing into unsustainable business practices. Two other banks, Banco Popular Espanol and Ibercaja, are considered capable of sourcing their capital needs from private sources, and have been given until June 2013 to do so – or to apply for state aid. And no additional capital is required for another seven banks - Santander, BBVA, Caixabank, Sabadell, Bankinter, Kutxabank, and Unicaja. Altogether, these 17 banks make up about 90% of Spain's banking system. Analysts say that the sector has made rapid improvements to stability, with a combination of reform measures and the direct provision of €200bn. As a result, it is possible that only half of the funds envisaged under the memorandum will be called on.