Spain’s banks have been handed a September deadline to raise capital of face being taken over by the Spanish government, according to Ambrose Evans-Pritchard.
Evans-Pritchard says only 5 of the country’s 17 cajas, many merged from smaller regional banks, currently pass the 10% tier 1 capital test.
The Spanish government now wants these banks to go to the private markets to raise cash, rather than rely on the government on the European Union for support.
Spanish banks are still doing their best to fight these new requirements, saying the capital requirements are higher than those of their European competitors, according to El Confidencial. More negotiations are set to occur today, between the banks and the government, that may allow for some fudging around the 10% tier 1 capital number.
The big problem is that there continues to be a lot of uncertainty about how much exactly the Spanish government will need to spend to support its banks. The number ranges from €20 to €80 billion, with banking sector analysts on the high end and the Spanish government on the low. The difference is somewhat based on unknowns regarding the country’s real estate sector.