Size of Spanish aid for banks to be determined in coming months

by on September 28, 2012 4:33 pm GMT

BRUSSELS, Sept 28 |
Fri Sep 28, 2012 12:33pm EDT

(Reuters) – The European Commission
welcomed on Friday Spain’s announcement of how much capital its
banks need, saying the exact amount of public funds to be
injected into the Spanish banking sector would be determined in
coming months.

Spain’s banks would need 59.3 billion euros ($76.3 billion)
in extra capital to ride out a serious economic downturn, an
independent audit of the country’s 14 main banks by consultancy
Oliver Wyman showed on Friday.

The worst-case estimate, which does not take into account
tax credits or future bank plans to raise their own capital, is
based on a scenario of a 6.5 percent contraction in Spain’s
economy between 2012 and 2014.

The audit said half of the 14 banks need more capital , with
a 49 billion euro shortfall for banks that have already been

“This is a major step in implementing the
financial-assistance programme and towards strengthening the
viability of and confidence in the Spanish banking sector,” the
Commission said in a statement.

“The necessary state aid provided to Spanish banks will be
determined in the coming months. It will be based on today’s
published results,” the statement said.

The Commission said the final amount will be reduced by
measures to be taken by the banks, such as the disposal of
assets, other restructuring measures and tapping funding
markets, and subordinated liability exercises.

“In addition, the capital shortfall of credit institutions
receiving public funds will be adjusted as a consequence of the
transfer of assets to the Asset Management Company,” the
Commission said.