Central bank takes control of Caja Mediterráneo

The Bank of Spain took control of the Caja Mediterráneo (CAM) savings bank after the markets closed on Friday, paving the way for possible nationalization. The move came after CAM's directors asked for intervention, said Economy Minister Elena Salgado.

The orderly bank restructuring fund (FROB) was expected to fire the administrators and appoint new managers, according to Bank of Spain, which added that the new institution will be renamed Banco CAM. Salgado told Efe news agency that the central bank would inject 2.8 billion euros and approve an additional 3-billion euros line of credit to assure the bank's liquidity.

"All of the measures adopted today are geared at stabilizing and guaranteeing the normal operations of the CAM Group so that it can meet its obligations to third parties," reads a Bank of Spain statement. "Account holders and creditors can now remain absolutely calm."

Earlier this month, the FROB rejected a request from the board of directors who asked for 2.8 billion euros in public funding to meet solvency requirements.

The Bank of Spain put CAM on a list of banks that were expected to ask for government funding to meet the new core capital requirement of 8 percent of risk-weighted assets, or 10 percent in the case of weaker lenders.