Big Deadline Facing Spain's Nervous Savings Banks
10 March 2011 @ 13:57
New rules capital requirement for banks in Spain come into force on Thursday, March 10, and Spain's vulnerable savings banks are looking around for any extra cash.
Under the new capital requirements, all Spanish banks must increase their core capital ratio to a minimum of 8 percent.
The rules are even tougher for all unlisted savings banks, or those that have private investment of less than 20 percent, with a core capital ration of at least 10 percent.
The move comes as the non-performing loan ratio, a key indicator for Spanish banks' financial health, jumped to its highest level since 1995.
According to the Bank of Spain, total bad debt reached 107 billion euros ($143 billion) in Febuary, or a bad loan ratio of 5.81 percent. That’s up from 5.68 percent in November 2010.
While major banks like BBVA and Santander can cope with their bad real-estate and construction loans, there are some strong concerns that some cajas, as the savings banks are known, may not be able to do so.
This is the second stage of the government’s plan to restore confidence in the troubled Spanish banking sector.
Read the full article on cnbc.com
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