Spain’s gone and rescued a bank yesterday.
THE BANK of Spain stepped in at the weekend to rescue CajaSur, a Cordoba-based savings bank owned and controlled by the Catholic Church. Spain’s central bank has guaranteed all deposits and appointed three administrators to take over the running of CajaSur to put it back on its feet until it can be sold to another bank.
The intervention came after merger talks between CajaSur and Unicaja of Malaga broke down last weekend. The bank, which had losses of €104 million in 2009 and €114 million in the first quarter of this year, has been badly hit by the collapse in the construction and property sectors and has bad debts on funds loaned to clients involved in property development.
First, the church controls the bank? These spaniards are crazy.
Next, what’s this saving a bank business? The government introduces austerity measures, and now they have to pay back all the liabilities of the failed bank, even if it had made crappy investments. This rescue may cost 2.7 billion euros, though only 523 million euros have been injected into the bank yet. The fear now is that more banks will need to be rescued, the costs will go up and thus the government will need to borrow more from the market to fund the rescue.
What they did is to remove the current managers of the bank, and replaced them with a provincial administrator.
Spain’s Central Bank rescued another bank about 15 months ago.
But this obviously can’t be a disaster. Up until last friday, the FDIC in the US had wound up 73 banks in the US and put 737 on a watch list. In the US deposits are protected by the FDIC upto $250,000, and the FDIC then tries to sell what’s left of the bank. In spain they’re attempting to protect all deposits – at some point more bad stuff will hit the fan, and the already indebted governments will be saddled with the cost of even keeping what’s left.
