MADRID—Despite complaints from Spain's ailing savings banks that reform efforts are moving too swiftly, the Spanish government is standing firm in its push to quickly convert the local institutions into traditional banks, according to people familiar with the matter.
The government's new solvency decree will firm up a set of ambitious overhauls announced by Spanish Finance Minister Elena Salgado last month. It represents Spain's latest effort to confront the structural problems of the euro zone's fourth-largest economy, which has been badly damaged by the implosion of its once-mighty real-estate sector.
The new rules will likely result in the end of the savings banks, known as cajas, whose archaic business structures are mistrusted by investors. The decree will establish a time frame for the restructuring of ailing financial institutions in need of fresh capital and define how much cash they will need to raise if they want to prevent partial nationalization.
The cajas are furiously preparing stock-market listings and sounding out private investors ahead of a government-set September deadline, in an attempt to avoid last-resort measures, such as capital injections from taxpayers. Senior caja executives complain that the September deadline may imperil listings, and could increase the number of partial nationalizations, because it would leave just a small window to sell shares before the summer holidays. So far, four institutions have disclosed plans for IPOs.
The government isn't bending much in the face of such complaints, however, according to a person familiar with the content of the decree. The September deadline won't be moved, but there will be some flexibility for lenders that have a strong business plan and have their capital-raising plans far advanced when the deadline passes.
"There simply isn't market appetite for all the cajas to go public at once," said David Franco, a partner at Freshfields Bruckhaus Deringer in Madrid. He sees further room for another consolidation round before the summer, with the most solvent cajas absorbing the weakest links.
Last year, Spain's central bank forced through a number of shotgun mergers among the cajas, reducing the number of entities to 17 from 45. Analysts say Spain's banking market remains quite fragmented, with excess capacity in a system in dire need of restructuring.
Spain recently announced higher capital requirements for all of its banks, part of a wider effort to shore up investor confidence in the country's financial system, particularly the cajas, whose weakness had become a flashpoint for investors around the globe. Spain's borrowing costs surged after Ireland was bailed out in November, but funding pressures diminished in recent weeks as the government focused on key pension and financial-sector overhauls. Banking stocks have also surged over the past month, indicating that investor appetite for Spanish lenders may be gradually returning, analysts say.
In a preliminary estimate, the government said banks will need to raise around €20 billion ($27 billion) in new capital, although that is about half the amount estimated by most private-sector analysts.
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