REFILE-EBA to target only five banks in Spain-sources

* EBA to include top 5 Spanish banks in recapitalisation plan

* Small and medium-sized savings banks omitted

* Leading banks do not foresee major capital boost

By Jesús Aguado

MADRID, Oct 25 (Reuters) - The European Banking Authority will take into consideration only the top five banks in Spain when drawing up a recapitalisation plan for the country's lenders, several banking sources told Reuters.

Santander , BBVA , Bankia , Caixabank and Popular are seen as the most likely to be affected by the recapitalisation proposals, the sources said.

EU finance ministers neared an agreement on Saturday to provide 100 billion euros ($140 billion) to European banks which would be obliged to raise their core capital ratios to 9 percent of risk-adjusted assets to help them withstand losses on euro zone sovereign debt and restore confidence in the wholesale money markets.

But the plans would leave out the small and medium-sized Spanish savings banks, or cajas, which economists see as the festering sore in the country's financial system due to the large amount of toxic real estate assets moored on their balance sheets.

The EBA declined to comment.

The fact that only five banks are likely to require recapitalisation reduces greatly the total amount of new capital to be raised, one economist said.

"For the time being, it's a big step forward that the EBA is only taking into consideration the big Spanish banks to calculate capital needs and this will reduce the total amount to be raised," said Jose Carlos Diez, chief economist at Intermoney Valores.

Spain's leading banks do not foresee they will require any major capital boost to comply with the European Banking Authority's (EBA) proposals for shoring up the region's banking system, banking sources said.

Lenders have recently strengthened capital to comply with tough new Bank of Spain regulations which require a core capital ratio of 8 percent of assets for listed banks and 10 percent for those which do not have any significant private investment.

CONVERTIBLE BONDS KEY

The impact of the recapitalisation plans would be limited, a spokeswoman for newly-listed bank Bankia told Reuters, even if the plans included measures to write down holdings of Spanish public debt by 5 percent.

A source close to Banco Financiero y de Ahorros (BFA), parent holding company of Bankia, said its capital needs were likely to be between 300 and 400 million euros under the recapitalisation plan.

Santander , BBVA and Popular declined to comment on the matter, saying that no agreements had yet been reached.

BBVA and Santander would need 3.1 billion euros each, Banco Popular would need 2.8 billion euros, Sabadell would need 2 billion euros and Bankinter would need 0.9 billion euros of a 100 billion euros Europe-wide capital injection, J.P. Morgan said in a research note.

The U.S. investment bank included Sabadell and Bankinter as systemically important banks. A spokesman at Sabadell said the bank wouldn't be included in the final list while Bankinter declined to comment.

Economy minister Elena Salgado said in Brussels on Saturday that in the case of Spanish sovereign debt, the average writedown for banks would be less than 2 percent and so the impact for Spanish banks would be minimal.

The five biggest Spanish banks had around 170 billion euros of Spanish public debt on their balance sheets as of Dec. 2010.

Lenders' capital needs will also depend on whether convertible bond issues which many of them have carried out over recent months to boost their balance sheets are included in core capital calculations, analysts said.

In the Europe-wide stress tests carried out in July, Spanish banks were not allowed to include as capital any convertible bonds or the provisions they had accumulated to cover future loan losses.

Opinion is divided on whether convertibles will be included in capital calculations this time round, although Salgado said on Monday she was confident that this would be the case.

"This is a request we have made, which is very specific to Spain, and I am sure it will be taken into account," she said in an interview on state radio RNE.

The most pressing problem in terms of the Spanish banks' capital is their exposure to a decade-long property boom which abruptly crashed in 2008, leaving them with billions of euros worth of bad loans to property developers and foreclosed real estate.

As of Feb. 2011, Spanish banks had 64 billion euros of real estate assets on their balance sheet, at cost price, and had provisioned for around 30 percent of this, according to data compiled by Reuters.

Spanish banks also face a funding spike of 130 billion euros of maturing debt next year, according to Thomson Reuters data, at a time when a credit crunch in wholesale markets has made liquidity a crucial concern.