Oct. 6 (Bloomberg) -- Spain will make lenders assume any losses generated from the overhaul of the nation’s savings banks through a decree law to shield public finances from the cost.
Spain’s industry-financed deposit guarantee funds will be united into one entity that assumes the losses that may arise when lenders seized by the state are sold. The funds have combined equity of 6.59 billion euros ($8.75 billion), Finance Minister Elena Salgado said today.
The measure will shield the budget deficit from any losses as the Socialist government fights to rein in the euro region’s third-largest shortfall. The changes will be passed by decree while Parliament is closed just six weeks ahead of a general election that polls show the ruling Socialists will lose.
“We’re doing it now because it’s now that we perceive the possibility that the process could produce losses,” Salgado said at a news conference in Madrid today.
Spain’s bank-rescue fund, the FROB, took over three more lenders on Sept. 30 after they failed to meet a deadline to bolster their capital in line with new requirements. The Bank of Spain is also in the process of selling Caja de Ahorros del Mediterraneo, which it seized in July, and Bank of Spain Governor Miguel Angel Fernandez Ordonez said last week the process may generate losses.
The changes will be passed by decree and can be ratified by Parliament’s permanent committee, Salgado said. She has spoken to the opposition People’s Party about the changes, the minister said, without giving details on their view.
--With assistance from Manuel Baigorri in Madrid, Editors: Andrew Davis, Jeffrey Donovan
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