Global General

Spain says banks need $27 billion

(Agencies)
Updated: 2011-01-25 09:36

MADRID - Spain said Monday its banks will need 20 billion euros ($27 billion) in new capital to meet new reserve requirements aimed at strengthening their finances.

Finance Minister Elena Salgado said said a government fund that has been pouring money into mergers among troubled cajas, or savings banks, might eventually buy stakes in the entities that cannot meet the new criteria by raising capital on the open market.

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She says that for that to happen banks will have to be listed on the stock market. The savings banks are not listed.

Worries about Spain's banking system have been an aggravating factor in the government debt crisis plaguing the euro zone.

Salgado said it will not be known until in the fall of this year which savings banks the government fund called the FROB might buy into.

At a hastily called news conference, Salgado said the overriding goal of the restructuring of the Spanish banking sector is to "dissipate any doubt about the solvency of lending entities, about their capacity to resist under difficult circumstances, in adverse scenarios, as unlikely as these scenarios might be."

The new core capital ratio will be 8 percent and might be even higher for savings banks, and this will be decided over the next few weeks, she said.

Salgado said the 20 billion euros?needed in new capital for the banking system will not be financed entirely by the government and it will be a few months before it is known how much public money is needed.

She said the new core capital requirement will take effect in December of this year.