New capital rules won't cut off lending, minister says

Spanish Economy Minister Elena Salgado on Friday rejected criticism by local lenders that the recapitalization requirements imposed on Spanish banks would "strangle" the flow of credit.

Under the criteria selected by the European Banking Authority (EBA), Spain's five biggest banks need 26.1 billion euros to meet the new pan-European minimum core capital ratio of 9 percent, almost a quarter of the 106 billion euros the EBA estimates European lenders as a whole need, and only slight below the ¤30 billion required of Greek banks, which are practically bankrupt. The banks have said they can meet the new requirements without having to tap the markets or draw on state funding.

"All the measures we have adopted at the European Council instill confidence and facilitate the funding of the banks, and if the banks find it easier and cheaper to fund themselves, they can pass this on to the economy in the form of loans," Salgado told local radio station SER.

Separately, the European commissioner for competition, Spaniard Joaquín Almunia, rejected the idea Spain's banks had been hard done by because of the EBA's decision not to allow them to include convertible bonds and generic provisions as capital.

"I tend to give more credence to banks that say they are going to meet the requirements than headlines that say Spain has lost the Battle of Trafalgar," he remarked.