Spain to accept rescue from Europe as its bank crisis worsens

Spain to accept rescue from Europe as its bank crisis worsens

Responding to increasingly urgent calls from across Europe and the United States, Spain on Saturday requested assistance for its cash-starved banks.

Euro zone finance ministers agreed to lend Spain up to €100 billion (NZ$160 billion) to shore up its teetering banks and Madrid said it would specify precisely how much it needs once independent audits report in just over a week.

The decision comes ahead of elections in Greece on Sunday, June 17, that could roil world markets.

The decision made Spain the fourth and largest European country to agree to accept emergency assistance as part of the ongoing euro crisis.

The aid offered was nearly three times the NZ$60 billion in extra capital the International Monetary Fund said (page 19) was the minimum that the wobbly Spanish banking sector needed to guard against a deepening of the country’s economic crisis, but it is unclear if Spain will need or accept the full amount of the facility requested on Saturday. It also appears none of the funds requested will be supplied by the IMF.

An exit of Greece from Europe’s monetary union and Spain’s need for financial support to capitalise its banks may trigger additional credit-rating downgrades in the region, credit rating agency Moody’s said.

Germany expressed public support for the Spanish request.

Meanwhile, markets are bracing for a wave of bank credit rating downgrades that could hit US banks as early as this coming week.

The Wall Street Journal is reporting that Moody's has said it is likely to reduce by the end of June credit ratings for 17 large global banks, including five of the six biggest US banks. The downgrades are expected to raise borrowing costs and crimp some lucrative trading businesses at these banks.

The well-signaled warning includes JP Morgan Chase, Bank of America, Citigroup, Goldman Sachs, and Morgan Stanley. Excluded from the list is Bank of New York Mellon.

Analysts expect S&P and Fitch to follow suit.


We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.


Comment Filter

Highlight new comments in the last hr(s).

Who will bail out Europe...."not I" said Obama..."I have my own sick economy thanks to idiotic govt, gross mismanagement and corporate banking corruption going back decades"....
Expect the 'independent audits' to be wildly inaccurate, because the banks are hiding many hundreds of billions in losses thanks to the property splurging madness in Spain.
Pundits are pointing to 300 billion being the final butchers bill.
Now imagine being a Greek peasant soon to vote.. learning of this bailout...that has no austerity demands attached to it....while you are expected to vote YES to austerity and poverty so Greece can have it's bailout will you vote in a weeks time....!
So let's assume the bailout loot recaps the deceased Spanish banks...will that mean Spanish govt and local govt debt has gone away!....not in this world it won't. The bank bosses left standing will harvest some fat salaries and bloated bonus payments from the bailout loot...that you can be sure of. And there will be political payoffs for sure...appointments of pollies to banks..fat perks all round.

Reminds me of a listing in yellow pages under floor sanding contractors in Wellington
A Perk
However the contractor won't be making as much as the pollies. Don't know if IRD has caught up with operator

Believe it or not...!
"Banking ombudsman Deborah Battell said she was not aware of complaints about banks being irresponsible in their lending."

Sorry Wolly, what's the point of the comment ?  Or is it another one where the borrower is always totally innocent and that its always the lenders fault for giving him the money ? Personally I think banks should turn the tap off and tank the market completely..right ?

This isn't 'lending them money'.
This is 'extending them debt'.
Soddy's 'negative pigs'. In ever-increasing numbers. The goalposts are shifting away with increasing speed - why is it that nobody is addressing the real problem?
Lack of positive pigs. Meaning: lack of underwrite.

For me its incredible, these are supposedly intelligent ppl, with knowledge and the ability to deduce....yet they seem total failures....
So it must be because they have no other credible plan to do so.  It must be have gone so far down the blackhole of make believe that we are past the event no one wants any pain and admitiing anything is wrong destroys the credibility game and then it ends really fast, hello Great Depression II, riots, suffering etc etc and bye bye this crop of pollies possibly via lamp posts and they have to work within the constraints of backroom economics....which on the face of it are inadequate and dont address the real problem.....
Unless, maybe austerity is way they have come up with to "power down".........

I believe it was in late 2011 that these very same banks were given a clean bill of health by the ECB when they did their "stress" tests.  Were the stress tests too lenient or have things deteriorated that fast?  Probably both!  
How long before Italy joins the party?

Brian Gaynor has a good article in the herald 9/6/12 regarding the housing bubble in Spain.
It would appear that the same problems could occur in nz and with more mortgagee sales than ever you would have to assume it's coming soon

Look forward to the self-regulating audits' to be madly erroneous, as the banks are hitting many hundreds of billions in fatalities thanks to the possessions splurging lunacy in Spain,click this to meet a nice gathering of  Spanish Quotes

Your access to our unique content is free - always has been. But ad revenues are diving so we need your direct support.

Become a supporter

Thanks, I'm already a supporter.