Bankinter (BKT) SA Chief Executive Officer Maria Dolores Dancausa said the rigor that comes with being rescued with European bailout money would teach a lesson to the Spanish banks that need the funds.
Submitting to the conditions that would come with European money “is going to be a good school for those that need to join this club,” Dancausa said in e-mailed responses to questions. She said it would be cheaper for Spain to take funds for its banks from Europe than to raise the money in the markets.
Concern over Spain’s ability to absorb mounting costs of cleaning up souring assets on the balance sheets of its banks has driven up the financing costs of the government, which is pushing for Europe to channel funds directly to lenders. Budget Minister Cristobal Montoro yesterday used a radio interview to call for outside support, saying the sums needed to aid Spain’s banks aren’t “astronomical.”
Prime Minister Mariano Rajoy, speaking in Spain’s senate yesterday, called on European institutions to help ease Spain’s financing problems and said bond buying by the European Central Bank last August had brought “considerable relief.” He also called for fiscal union, a single deposit guarantee fund in the 17-nation euro area and a mechanism for joint bond issuance.
‘Men in Black’
Shares of Spanish banks rose today on speculation European policy makers will take steps to ease the crisis in the country. Banco Santander SA (SAN), the largest bank in Spain, climbed 3.1 percent to 4.72 euros by 1:21 p.m. in Madrid trading. Bankinter rose 0.2 percent to 2.54 euros.
The extra yield that investors demand to hold Spanish 10- year bonds compared to German bunds has risen to more than 500 basis points from about 430 basis points before last month’s takeover of the Bankia group, Spain’s third-biggest lender, after souring loans for real estate forced its nationalization.
The Bankia group’s request for 19 billion euros ($23.8 billion) of state support to clean up its balance sheet is a “source of scandal” for other banks and for Spanish society at large, even though it was understandable why new management would seek the funds, Dancausa said.
In his interview yesterday with Onda Cero radio, Montoro said markets had closed for Spain. He denied the need for a full bailout, saying the “men in black” wouldn’t be coming to the country.
Germany opposes Spain’s request for Europe’s bailout fund to be able to provide money directly to banks, and the rules require aid to be funneled through governments. Finance ministers for Group of Seven countries held a call yesterday to coordinate their response to Europe’s financial crisis.
$40 Billion or More
Emilio Botin, the chairman of Banco Santander SA, Spain’s biggest bank, said on June 4 that 40 billion euros in European funds to aid nationalized lenders, including Bankia, would suffice to complete the country’s banking cleanup.
“It may be 40 billion euros or it may be more,” said Peter Braendle, who helps manage about $60 billion at Zurich- based Swisscanto Asset Management.
Using European bailout funds carries the risk that investors will stigmatize Spanish banks, Dancausa said. One way to avoid that would be to have the lenders that need funds from Europe request it individually, she said.
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