BANKING

EC wants rules imposed on ‘cajas’ controlling banks

Foundations must have reserve funds to back up commercial units in case of financial difficulties

Claudi Pérez
Brussels -

The European Commission has finally accepted that Spanish savings banks, or cajas, can control commercial banking units they have set up through foundations but wants to see a series of onerous conditions imposed on them to safeguard against financial frailty.

According to a document drawn up by the European Commission that has been sent to the German parliament and other euro-zone countries to which EL PAÍS has had access, Brussels will require cajas with controlling stakes in commercial banking arms to set up a so-called Reserve Fund that can be drawn on to ensure sufficient capital can be injected into those banks if they run into difficulties. The document said that this in practice would mean that banking foundations would find it “costly” to exercise control over their commercial banking units. Control is taken to mean having a stake of 30 percent or more.

The report, which is generally favorable of the restructuring being carried out of the Spanish banking system, also calls for the Bank of Spain to be granted “special powers” to oversee commercial banks controlled by cajas by demanding they establish a “management protocol” and a “financial plan” that require its approval.

In the event of any shortcomings, Brussels wants the Bank of Spain to have the authority to require cajas to reduce their holdings in their commercial banking units to below a level that allows them control.

The management boards of the regional cajas are subject to political influence, one of the factors that led to some of them becoming unstuck because of investment decisions that did not adhere to strict banking criteria.

Europe has granted the government a loan of 40 billion euros to recapitalize the banking sector. The bulk of the funds are going to four banks that have been nationalized after encountering difficulties because of their exposure to the ailing real estate sector. The loan is also being used to capitalize a bad bank, set up to absorb Spanish lenders’ toxic assets.

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