Spain formally requests almost 37,000 million for the bank, which it expects to receive on December 12
- The transfer will occur through five series of debt instruments exchangeable for cash to maturity.
- Bankia will receive 17,960 million euros, Catalunya Caixa 9,080 million, Novagalicia Bank 5,425 million and Banco de Valencia 4,500 million.
The Ministry of Economy reported Monday that Spain has formally requested 36,968 million euros for the four nationalized entities, as well as 2,500 million for the contribution of the FROB to the "bad bank", an economic support that it expects to receive in around December 12 .
In a press release, Economía explained that the "procedure for the receipt of funds for the recapitalization of the financial sector culminates today with the formality of these aid ", which allows the injection of 17,960 million euros in BFA-Bankia, 9,080 million in Catalunya Banc, 5,425 million in NCG Banco, and 4,500 million in Banco de Valencia.
In addition to these amounts, the rescue fund will inject a first tranche of 2,500 million euros to the Asset Management Company from the bank restructuring -Sareb, the so-called 'bad bank'-, which has already been incorporated as a public limited company. an initial social capital of 60,000 euros. The aid to the 'bad bank' will arrive in February 2013 in the form of promissory notes, according to the sources of the Ministry of Economy.
Spain is expected to receive these funds, from the European Stability Mechanism (ESM) , around next December 12, as indicated by Economy, which has added that the transfer will occur through five series of debt instruments exchangeable by effective to expiration.
A long process
On November 28, the European Commission approved the restructuring plans of the financial entities of the so-called Group 1 ( the nationalized ones ), and a day later, on November 29, the Financial Assistance Agreement was signed. of documents that establish the specific terms and conditions of the ESM loan to Spain.
In a statement, Economía explained that the "procedure for receiving the funds for the recapitalization of the financial sector culminates today with the formal request for this aid ", which allows the injection of 17,960 million in BFA-Bankia ; 9,080 million in CatalunyaBanc, 5,425 million in NCG Banco; and 4,500 million in Banco de Valencia.
The EC imposed that the nationalized banks reduce their size by 60% The transfer will occur through five series of debt instruments exchangeable for cash to maturity.
The request comes when Eurozone finance ministers have formally approved the injection of the first tranche of the bank bailout. "The cost will be clearly below 1%, " said Economy Minister Luis de Guindos, who stressed that it represents an important saving compared to the 4.3% that the Fund for Orderly Bank Restructuring had to issue. (FROB).
The EU aid is unlocked after the Commission and the European Central Bank (ECB), with the assistance of the International Monetary Fund (IMF), have verified that Spain meets the conditions required in the memorandum of understanding.
However, Brussels asks the Government to continue with the adjustments and reforms , and suggests in particular that it limit the application of reduced VAT, increase taxes on fuels and continue with the labor reform to guarantee wage moderation, as stated in the report on the bank rescue.
Last Wednesday, the European Commission imposed a size reduction of more than 60% to Bankia, Catalunya Caixa, Banco de Valencia and Novagalicia Banco until 2017 as a condition to receive between the four 37,000 million euros.
Brussels has warned of the "difficulties" that will face the Sareb to sell their homes due to competition from entities that have not received public aid and also want to get rid of their real estate portfolio and can offer financing.
What Brussels asks in return
The demands of Brussels will oblige the entities to focus their business model on retail loans and loans to SMEs in their historic regions, abandoning credit lines in favor of real estate developments. They should also limit their presence in the wholesale market.
The profits must be devoted to the restructuring of the entities. All the banks have committed to cede some industrial and subsidiary holdings, which the Commission has avoided specifying. The proceeds of such transfers will help fund the restructuring and, therefore, will limit the need for additional assistance, in addition to reducing distortions of competition.
In addition, Bankia and Catalunya Caixa will transfer the fixed-income securities they hold in their portfolio of negotiable and treasury securities. Catalunya Caixa will also transfer all of its venture capital funds. The benefits should be devoted to the restructuring itself.
According to the restructuring plans approved by the Community Executive, the shareholders and holders of preferred and subordinated debt must also contribute to the restructuring plans. Your contribution will reduce the necessary state aid by around 10 billion euros, according to the calculations of Brussels.
Finally, all banks undertake to limit the remuneration of their executives according to what is already foreseen in Spanish legislation, not to pay coupon for hybrid instruments and not to publicize public aid or use it for aggressive commercial practices. In addition, they will be prohibited from making acquisitions.
The European Commissioner for Competition, Joaquín Almunia, announced that the next round of restructuring plans will be approved on 20 December – the Banco Mare Nostrum, Banco Caja 3, Liberbank and Ceiss – but he did not want to encrypt the ESM aid they will need