Spain’s troubled banks need roughly 59.3 billion euros ($76.3 billion) to shore up their finances, according to the results of an independent audit released Friday.
But in presenting the results of U.S. management consulting firm Oliver Wyman’s report, Spain’s secretary of state for the economy, Fernando Jimenez Latorre, said the government may only ask its euro-zone partners for around 40 billion euros in assistance, less than half the amount approved this summer.
He explained that lower figure by noting there could be a “sharp lightening of the capital needs” during the restructuring processes of some of those financial institutions.
One reason the shortfall will be less is that some toxic assets - particularly the non-performing loans banks were saddled with in the wake of the collapse of a massive housing bubble - will be transferred to an external Asset Management Company.
That so-called “bad bank” was approved by Prime Minister Mariano Rajoy’s administration early this month and is expected to be up and running before year’s end.
The loan portfolios of Spain’s 14 largest banking groups - accounting for 90 percent of the sector - were examined in the audit.
Spain’s memorandum of understanding with the European Union on aid for its struggling banks, signed in July for up to 100 billion euros, stated that the sector’s financial needs would be determined before the end of September.
Oliver Wyman divided Spain’s banks into four groups: institutions that have no identified capital shortfall, or Group 0; those that have been taken over by Spain’s state-backed FROB bank-restructuring fund, or Group 1; entities that cannot meet their capital shortfalls without state aid, or Group 2; and those able to meet their capital shortfalls privately, or Group 3.
Among the nationalized banks, BFA-Bankia requires 25 billion euros, while Catalunya Caixa needs 10.83 billion euros and Novagalicia and Banco de Valencia have a capital shortfall of 7.18 billion euros and 3.46 billion euros, respectively.
The audit also showed that Banco Popular, one of Spain’s largest banks, needs 3.23 billion euros, a figure the institution said Friday it can raise without state aid.
Seven Spanish banking groups - Santander, BBVA, La Caixa, Sabadell, Kutxabank, Bankinter and Unicaja CEISS, which together account for 62 percent of the financial sector’s total loan portfolio - were placed in Group 0.
The deputy governor of Spain’s central bank, Fernando Restoy, said banks currently in the process of merging with other institutions plan to continue operating.
And he added that the central bank’s intention is to “auction off and sell” the four nationalized banks “as soon as possible.”
After learning the results of the audit, the European Commission - the European Union’s executive arm - called it a “major step in implementing the financial-assistance program and towards strengthening the viability of and confidence in the Spanish banking sector.”
It added that the first group of banks would be recapitalized by November.