* Total EU aid for Spanish banks amount to 41.4 bln euros
* Spain will nationalise two new former savings banks
* Lenders will shrink balance sheets, cut jobs
By Jesús Aguado and Foo Yun Chee
MADRID/BRUSSELS, Dec 20 The European Union has
approved a cash injection of 1.87 billion euros ($2.5 billion)
into four Spanish savings banks, the second phase of an overhaul
of the country's banking sector.
In return for the funds, the four lenders, which ran into
trouble when a decade-long property boom burst five years ago,
will reduce their balance sheets by up to 40 percent by 2017.
The plans include at least 4,000 job cuts, on top of the
around of 8,000 already announced in the first phase of Spain's
The banks will have to refocus on retail and small business
lending in their core regions and two of the banks - BMN and
CEISS - will be nationalised. The other two, Caja 3 and
Liberbank, will receive temporary aid through contingent
convertible bonds, known as Cocos.
Spain has committed to sell CEISS and have BMN and Liberbank
listed before 2017. Caja 3 will cease to exist as a standalone
entity and will be integrated into bigger lender Ibercaja.
This will leave Spain's banking industry with about 12
entities compared to the more than 50 which existed before the
financial crisis began in 2007.
"The restructuring plans of BMN, Caja3, Banco CEISS and
Liberbank will make these banks viable again, thereby
contributing to restoring a healthy financial sector in Spain,
while minimising the burden for the taxpayer," EU Competition
Commissioner Joaquin Almunia said at a news conference.
An independent audit showed in September Spain's banking
system needed around 60 billion euros to weather a serious
downturn of the economy.
Spain has already received 39.5 billion euros of European
funds to prop up nationalised lenders Bankia,
CatalunyaBanc, Novagalicia Banco and Banco de Valencia
and to set up a so called bad bank.
Separately, two banks - Banco Popular and Ibercaja
- raised money by themselves to cover their needs, while seven
out of the 14 lenders tested were considered by the audit to be
well enough capitalised.
Transfers of distressed property assets into the "bad bank"
and losses imposed to shareholders and junior bondholders have
reduced the final amount of public cash needed by around 20
The Bank of Spain on Thursday said junior bondholders in the
four lenders would take haircuts ranging between 10 percent to
The rescued banks have also committed to sell a number of
industrial stakes and subsidiaries and to limit the
remunerations of the executives.
Liberbank, which has already sold its 5 percent stake in the
gas operator Enagas, still has smaller stakes of 5
percent in IT firm Indra or a 6.1 percent of the pulp
BMN owns a stake in oil producer Deoleo.