The European Union has given the go-ahead for the payment of 1,87 billion euros to four former Spanish savings banks, in what constitutes the second phase of the restructuring of the Spanish banking system. In exchange for the funds, the four lenders (Bmn, Ceiss, Caja3 and LiberBank), which got into trouble for the bursting of the real estate bubble five years ago, will have to make budget cuts of up to 40% by 2017. The liquidity injection it will involve the nationalization of two institutes – BMN and CEISS – through the subscription of ordinary shares by the State, while Liberbank and Caja3 will receive aid through 'contingent convertible bonds' – the so-called CoCos.
The Commission explained that the Spanish authorities have undertaken to sell Ceiss and list BMN and Liberbank by 2017. Caja 3 will cease to exist as a separate entity and will be integrated into the larger Ibercaja. The Spanish central bank has announced that, according to the recapitalization plan, the holders of junior category bonds of the four savings banks will have to undergo a devaluation between 10% and 75%. Spain has already received 39,5 billion in European funds to secure credit institutions Bankia, CatalunyaBanc. Novagalicia Banco and Banco de Valencia and to form the so-called 'bad bank'.
