Saturday 4 February 2012

Spain Coaxes Banks to Merge With Extra Time to Purge Losses


Spain’s new government gave banks an extra year to recognize losses if they agree to merge, as it tries to overhaul the financial industry crippled by the collapse of the nation’s property boom four years ago. Banks have a year to make 50 billion euros ($66 billion) of provisions against real-estate assets, according to a decree passed by the Cabinet today. If they agree by the end of May to merge, they get a further 12 months to take the charges and can tap the state’s bank-bailout facility for funds. Prime Minister Mariano Rajoy, in power since December, is trying to restore the flow of credit to Spain’s shrinking economy and improve confidence in lenders saddled with 175 billion euros of troubled real-estate assets. The government wants to remove doubts about the way assets are valued to enhance banks’ access to financing while shrinking the oversized industry. “By improving the transparency and the perception of strength of Spanish banks, they will be able to finance themselves better, and that is going to allow them to make loans,” Economy Minister Luis de Guindos said late yesterday in Madrid.