Spain to unveil bank plan soon

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Spain to unveil bank plan soon


News Article Date: Thursday 07th of May 2009

Spain's government is in talks with the Bank of Spain on a restructuring plan for the country's banking sector and plans to unveil details in coming weeks, Deputy Prime Minister Maria Teresa de la Vega said on Thursday. "We will lay out the details in the next weeks," De la Vega told reporters when asked about the plan aimed at Spain's small and medium-sized banks. De la Vega said Spain's Socialist government would hold a special cabinet meeting on May 6 to discuss measures in its so-called "Plan E" economic stimulus package, which is worth nearly 5 percent of Spanish gross domestic product. "We will evaluate the measures implemented in this plan," De la Vega said of the meeting, which will follow April jobless numbers on May 5. Spanish bank lobbies have called on the government to set up a bailout fund for troubled financial institutions which face rapidly rising bad debt following the collapse of credit-driven housing and consumer spending booms. Spain's Socialist government has held talks with the Bank of Spain and political parties on proposals to restructure the banking system, including measures to cut political influence in savings banks and streamline central bank interventions. It remains unclear whether the government is prepared to set up a bailout fund with public money. Large Spanish banks have held up well to the global crisis due to conservative investment policies, but credit quality at small and medium-sized banks is being eroded by high exposure to Spain's housing market. In March, the Bank of Spain was forced to rescue savings Bank Caja Castilla la Mancha and the CECA bank lobby warns it is only a matter of time before further bailouts are needed. Analysts believe Spanish bank sector recapitalisation could cost as much as 60 billion euros ($79.88 billion).

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