Spain bank rescue fund to include all big lenders
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Wednesday, 22 Oct 2008
The Spanish government's 30-50 billion euro fund to buy assets from banks will be available to all major lenders, including credit firms linked with car makers and supermarkets, a government spokeswoman said on Wednesday.
The fund will favour banks and loan companies that are most active in the country's credit market, according to a preliminary proposal under discussion between the main Spanish political parties, an Economy Ministry spokeswoman said.
The Financial Asset Acquisition Fund will acquire high quality assets from lenders as part of a coordinated European effort to provide liquidity to a financial sector paralyzed by the global credit crunch.
The fund could include lenders associated with automobile companies as well as consumer chains such as the supermarket Corte Ingles.
Spain's lenders include the banks and regional savings banks which jointly hold over 80 percent of total loans, as well as co-operatives and consumer credit groups which have no deposit facilities but lend directly to consumers.
Spanish Credit Crunch
France and Germany also announced on Tuesday that their own rescue packages will go beyond banks and include all credit agencies.
In Spain, new car registrations plummeted 32 percent in September from a year earlier, the fifth consecutive month of declines and leading to a accumulated drop in the first nine months of 22 percent.
On Monday, Spain's parliament agreed to the basic outline of the fund, though final details are still under discussion and should be approved before the end of next week, the government has said. The fund's first 5 billion euros will be available next month and make temporary asset acquisitions and the second 5 billion euros will acquire top grade asset- and mortgage-backed securities in December.
The government will not acquire more than 10 percent of any credit group's assets through the plan, according to the preliminary proposal for the fund, the spokeswoman said.
The final details of the plan will be hotly debated by the main political parties with special attention on who will decide where the money goes.
Regional savings banks, which hold almost half of the total 1.8 trillion euros of debt in the country, are unlisted entities with close political ties in the regions in which they operate. They have been hit hard by the collapse of the property sector with almost 70 percent of their total debt held related to real estate and construction at the end of the second quarter.
Spain's banks and savings banks are well provisioned against bad debt and strict Bank of Spain regulation has kept debt related to the U.S. sub-prime crisis off the balance sheet. Emilio Botin, the chairman of Spain's largest bank Santander , said last week that the country's banks will not need the government to take stakes due to their strength and solvency.
"The fund aims to instil confidence in the system but what worries me is it is money being channelled, not through the market, but through politicians," said professor of economic Celso Forniers at Rey Juan Carlos University. "In the end, this will distort the market."
Source: http://www.guardian.co.uk/
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