Tenerife News

The Bank of Spain (BDE) yesterday took action to remove the directors of Caja Castilla-La Mancha and appointed administrators to replace them after the bank reported “liquidity problems.”

Up to 9 billion euros of the lender’s liabilities have been guaranteed by the government as part of the rescue package.

The Bank of Spain said that the intervention would ensure that the bank is still in a position to meet its obligations to depositors and creditors adding that there is no need for panic for the banks customers.

In a statement, the Bank of Spain said that Caja Castilla-La Mancha has a positive net worth and is a solvent entity, but the status of its regulatory capital and its financial prospects required action to ensure their future.

Caja Castilla-La Mancha makes up less than 1% of the assets of the Spanish banking system, and the Bank of Spain wants to insist that the Spanish financial system remains sound, although no bank is immune to the international financial crisis.

Caja Castilla-La Mancha had been in merger negotiations with Ibercaja and Unicaja to find a solution in the private sector but had eventually run out of time as the Government decided to step in.

Finance Minister, Pedro Solbes, said yesterday “We always think that the best solution is one that allows the industry to resolve its own problems. Unfortunately, the efforts have been unsuccessful.”

This is the first time since 1993 that the Bank of Spain has had to intervene and effectively rescue a Spanish bank. Defaults on loans and mortgages have reached an all time high in Spain and have trebled since the beginning of the financial crisis 2 years ago. The countries real estate boom has turned to bust, property prices are in decline and unemployment has rocketed to 14% – the highest in the European Union. The Spanish economy is forecast to contract by 1.6% this year.

For regular updates on Tenerife News and information, subscribe below:

• Do you think this is the first of many banks or a one off?
• Is the crisis in Spain about to get worse?
• Add your opinion below.