Spain's Santander complains bank clean-up bill is unfair

MADRID, April 2 Tue Apr 2, 2013 12:37pm EDT

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MADRID, April 2 (Reuters) - Santander, the largest lender in the euro zone, berated Spain's government on Tuesday for making healthy banks compensate small investors who lost money in the country's financial crisis.

Sound banks are required to contribute an extra 2 billion euros ($2.6 billion) to the country's Deposit Guarantee Fund to help compensate some 300,000 investors in risky bank debt, primarily belonging to rescued lenders.

"Everyone should pay their way ... whoever has a problem should sort it out themselves; in short, I do not like the solution," Santander's chairman Emilio Botin said at a presentation for a charity which he chairs.

Along with other banks that survived Spain's property crash without state aid, Santander is unlikely to have any leeway to escape the measure. Smaller and weaker banks will be exempted.

Spain is becoming increasingly reliant on healthier lenders to help it stabilise its financial system and shore up government books, by taking rescued banks off its hands while also pumping credit into a recession-hit economy.

The country's banking sector clean-up forced Madrid to seek last year a 41-billion-euro European bailout for the weakest lenders. Sound banks helped with that too, providing capital for a 'bad bank' housing rotten property assets.

Few have so far resisted requests by the government to help through contributions such as these, although the country's number two bank BBVA last year refused to fund the 'bad bank' while all of its peers stepped in.

Santander has so far supported major initiatives, though earlier this year it and several other banks dashed the government's hopes of disposing of rescued Catalunya Banc by putting in bids well below the state's expectations.

The government, still struggling to reduce its own budget deficit, had wanted to sell Catalunya Banc without offering special support to buyers such as an asset protection scheme.

The latest plan to hike contributions to the Deposit Guarantee Fund (FGD) was designed to provide liquidity for investors, including many with modest incomes, in risky hybrid debt known as preference shares.

Their holdings will swapped into shares at a discount. As some rescued banks are not listed, the government will use the FGD to buy some investors out.

Banks that invested in the government-backed 'bad bank' would be allowed to make smaller contributions to the FGD, Economy Minister Luis de Guindos said in March, leading many to speculate that BBVA would be penalised for not taking part.

A BBVA spokesman said on Tuesday that its gross extraordinary contribution to the FGD would be 300 million euros, in proportion to its market share.

The first contributions are due for the beginning of 2014. ($1 = 0.7784 euros) (Writing by Sarah White; Editing by Julien Toyer/Ruth Pitchford)

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