The stress test results published by the Bank of Spain on Friday underlined the performance gap between the commercial banks that account for half of the sector and many of the savings banks whose bankrolling of the Spanish property surge left them exposed as the construction boom collapsed.
Five Spanish banks are likely to require a total of about €2 billion, or $2.5 billion, in additional capital after failing the stress tests carried out by the Bank of Spain. Their failure did not come as a shock, however, because many of the savings banks, or cajas, had already needed to seek additional government funding.
“A lot of progress has been made since the start of the crisis — and this is part of the progress,” Miguel Ángel Fernández Ordóñez, governor of the Bank of Spain, said in Madrid on Friday. The tests, he said, showed “the enormous means” available to Spanish banks to overcome any deepening of the crisis.
“When there are doubts, you have to be absolutely transparent, and this is what we have done,” he added. “People are not stupid and will realize that the Spanish banking sector as a whole is pretty clearly above average.” He added: “I have faith in the markets.”
Mr. Fernández Ordóñez said the test results vindicated the recent push to force the cajas to consolidate, as well as a regulatory overhaul approved last week by the Spanish Parliament to allow the cajas to open up as much as 50 percent of their capital to outside investors.
The five banks were also among a recent wave of mergers that are due to cut the number of cajas to about 20 from 45. One of the test failures, CajaSur, was de facto removed from the list following its recent takeover. The Spanish central bank rescued CajaSur in May after it rejected a merger proposal from a larger rival. CajaSur was then auctioned, with the winning bidder, Banco Guipuzcoano, announced only last week.
In contrast, all of Spain’s commercial banks relatively easily passed the stress tests, led by Banca March, whose Tier 1 capital would remain at 19 percent even under a deepening hypothetical economic slump. The Tier 1 capital of the largest Spanish bank, Santander, would meanwhile remain at 10 percent, well above the 6 percent minimum level recommended by the committee that carried out the European tests. The commercial bank with the weakest Tier 1 capital structure, according to the tests, was Banco Pastor, which would just meet the 6 percent threshold.
Iñigo Vega, banking analyst at Iberian Equities, a Madrid brokerage, said that the tests showed it would be “manageable” for the restructuring fund, whose funding capacity could be leveraged as high as €99 billion to cover any additional shortage of capital for the cajas.
“Over all, there were no surprises; if anything, there was lower capital shortage than expected,” Mr. Vega said.
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