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This article originally appeared at elEconomista.es, an online Spanish business news website. Click here for the original version of this article, in Spanish.The CAM (or Caja de Ahorros del Mediterráneo) is between a rock and a hard place.
Its situation is critical and it may be doomed to extinction.
Ultimately, the two alternatives being considered by the Bank of Spain, takeover by another institution or immediate intervention, will lead to the same situation. However, a merger with a larger bank seems to be less traumatic than the second option.
The CAM headquarters in Alicante, on the east coast of Spain, reported yesterday to the National Securities Market (the equivalent of the U.S. Securities and Exchange Commission) that it would seek assistance from the FROB (the government fund to help the battered Spanish financial system). While that happens, CAM´s president, Modesto Crespo, has convened a council to discuss possible alliances after the rupture of Base Bank (a new banking entity that was supposed to be created after the merger of four different cajas, including the CAM).
Under these desparate circumstances, the board of directors of the CAM has begun to seek advice on the legal consequences of whether the other three cajas — Cajastur, Caja Cantabria, and Caja Extremadura — can continue ahead in the merger to create Base Bank.
Spanish regulators are expected to give the CAM adequate time to find an ally with which to merge its assets, but time is running out. The deadline is April 28th, as the Bank of Spain must send the results of its stress tests to the European authorities by that date.
It appears virtually impossible that the regulator that governs the Bank of Spain, Miguel Angel Fernandez Ordonez, will be ready to execute his plan B: a Government intervention. For now, the major financial groups of Spain, like Santander and BBVA, have demand high guarantees against losses, so a buyout by either of those banks is off the table.
Candidates to take over the CAM fear that the entity’s real losses are worse than those declared. According to preliminary estimates, the CAM needs more than 2,500 million euros to raise its capital ratios to levels required by the new regulations. The negotiations in the coming days will be vital to the survival of the entity.
This article was written originally in Spanish by Fernando Tadeo and edited in English by José Luis de Haro and Julie Zeveloff.