* Savings banks to seek stock market listings - source
* Government to take stakes if investors don't materialise
* Capital needs seen at 25 bln to 50 bln euros
(Adds government comment)
By Manuel Maria Ruiz and Sonya Dowsett
MADRID, Jan 21 Spain plans a partial state
takeover of its weakest savings banks as it seeks to reassure
investors a rescue will not weigh on its deficit.
A source familiar with the matter told Reuters on Friday the
government would force debt-laden regional savings banks to
become conventional banks and seek stock market listings to
persuade skittish investors that they are good investments.
The state-backed bank restructuring fund (FROB) would then
take stakes in the banks -- known as cajas -- that fail to
attract private investment, the source said.
Up to now the FROB has functioned as a lender of last resort
to the cajas.
Deputy Prime Minister Alfredo Perez Rubalcaba told reporters
a new savings bank plan was coming soon and could include new
laws, implying a reform of the FROB.
High levels of bad property loans at the cajas are seen as a
major risk for Spain, working to slash its budget deficit to
stave off fears it will need an Ireland-style rescue from the
European Union and International Monetary Fund.
Signs of greater transparency and a definitive plan for the
banks sent Spain's 10-year benchmark bond ES10YT=TWEB to its
highest price since early December and shares in Spain's biggest
banks jumped to their highest level since Nov. 1 (SAN.MC)
"I think it's encouraging. One of the root causes of the
lack of confidence in the euro area is the fear that Spain is
the next Ireland," BNP Paribas chief euro zone economist Ken
Analysts' estimates of the cost of recapitalising the
savings banks range from 17 billion to 120 billion euros, with
consensus falling in the 25 billion to 50 billion area, though
Economy Minister Elena Salgado says it will be much lower.
Rubalcaba declined to provide details. Media reports said
the economy ministry and central bank have not yet agreed on
details of how the partial nationalisation would be implemented.
For a FACTBOX on the savings banks click on [ID:nLDE70K0BR]
For an INSIDER video on the savings banks click on:
For a graphic on Spanish financial sector bad loans, click
For analysis on cajas struggle to attract capital, click on
SIGNS OF PROGRESS
If the clean-up costs around 50 billion to 60 billion euros
and the government's plan is credible, "that's a net positive",
Fitch debt rating agency's head of sovereign ratings said on
Even in the absence of private investment into the weak
regional lenders, economists say Spain could afford that level
of rescue without seeking outside aid, which could take pressure
of euro zone aid fund the European Financial Stability Facility.
Analysts say the 440 billion euros EFSF could probably not
cope with a full bailout of Spain -- covering all its debt
obligations to mid-2013 -- without extending the fund's scope.
Even if the bulk of the bank restructuring bill eventually
ended up back with the state, certainty about what it amounted
to would help calm investor jitters about Spain's liabilities.
The Bank of Spain forced the cajas last year into a round of
mergers, reducing their number to 17 from 45. Five of them
failed Europe-wide stress tests on banks last year.
They must reveal by Jan. 31 more details about their bad
loans and property holdings. Only two cajas have reported so
far, but once all the reports are in, the Bank of Spain will be
able to give a clear idea of the total recapitalisation needs.
Spain's borrowing costs have soared over the past year on
concerns its high deficit and stagnant economy will force it to
seek outside help, but Socialist Prime Minister Jose Luis
Rodriguez Zapatero's cost cuts and economic reforms have calmed
RESCUE VS DEFICIT
A bank recapitalisation worth 50 billion euros would amount
to about 5 percent of Spanish gross domestic product, which
could endanger the government's goal of cutting the budget
deficit to 6 percent of GDP this year.
The FROB would have to raise debt on the market to purchase
the bank stakes. In theory, the books would be balanced by the
stakes in the savings banks to avoid a deficit impact, although
the risk is those stakes dwindle in value.
Taking stakes in the banks will increase the government's
debt needs, said Josep Soler, general director of Financial
Studies Institute. "We still don't know ... how much the cajas
are going to need," he said.
The FROB would invest in the cajas at market rates subject
to EU anti-trust approval, a government source told Reuters.
While some of the biggest cajas are seen as attractive,
investors have shied away from smaller ones, notorious for being
used by local politicians to fund pet projects from casinos to
The cajas plan a March trip to Asia, including China,
following similar road shows in Europe and the United States.
(Additional reporting by Elisabeth O'Leary, Nigel Davies and
Robert Hetz in Madrid and William James in London; Writing by
Fiona Ortiz; editing by Mike Peacock)