Spain's savings banks, considered a fiscal liability for the government, have 7 months to boost capital through private investors or the state will partially take them over, Economy Minister Elena Salgado said on Monday. Salgado said the total capital requirements for the banks should not hit more than 20 billion euros.
Private estimates of the hole have ranged as high as more than 100 billion euros due to the savings banks heavy exposure to bad property loans.
The government wants to restore confidence in Spain's financial sector and reassure investors a rescue of its ailing savings bank will not weigh on its deficit and it will not follow Ireland in seeking an EU/IMF-backed bailout.
"The government considers it necessary to take a number of measures to dispel any doubt over the solvency of our credit entities and their ability of withstand shocks even under the most adverse scenarios, and so ease their access to capital markets," Salgado said during a news conference.
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