Bloomberg News

Spain’s Banks Will Contribute to Fund Acquiring Preferred Shares

March 22, 2013

Spain will require the country’s banks to contribute as much as a combined 2 billion euros ($2.6 billion) to help absorb the stock of two nationalized lenders after a swap of junior debt for shares.

The money will go to the Spain’s deposit-guarantee fund and will be used to help acquire stock issued in exchange for preferred shares sold to customers of Catalunya Banc and Novagalicia Banco, Economy Minister Luis de Guindos said at a press conference today in Madrid.

Under the terms of a European bailout for Spain’s banking system approved last year, subordinated debt and preferred shares of banks that took state aid must be exchanged for stock. The government seeks to increase the liquidity of Catalunya Banc and Novagalicia Banco because they aren’t listed, de Guindos said.

The minister has been critical of the practice whereby Spanish banks raised capital by selling debt instruments including preferred stock to consumer-banking clients who in many cases thought they were putting their money in deposits.

Banks must make 40 percent of their contribution to the deposit-guarantee fund no later than 20 days from the end of this year, the Economy Ministry said today in a statement.

To contact the reporters on this story: Charles Penty in Madrid at cpenty@bloomberg.net; Angeline Benoit in Madrid at abenoit4@bloomberg.net

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net


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