Caja Madrid And Bancaja To Merge, Forming Largest Spanish Savings Bank

Tyler Durden's picture

The shadow consolidation of Spain's insolvent financial sector continues: El Pais reports that a brand new "cold fusion" of Caja Madrid and Bancaja will result in the largest savings bank in Spain. "The operation, which must be approved by the directors of the entities would have the approval of the Bank of Spain, which gave impetus to the recent decision by Caja Madrid to form a an SIP (Institutional Protection System) with the following "cajas": Canary Island, Rioja, Avila, Segovia and Laietana." All this process does is to dilute bad assets, as well as shareholder equity, in those places where it still exists. On the other hand, all Spain is doing is consolidating its bank system and instead of having a variety of smaller banks, it will end up with 5-10 TBTFs, whose eventual failure will have a far more adverse impact on the economy than if the country were to let the smaller entities fail when they become insolvent.

Some more from El Pais:

With this potential agreement, the integration of boxes you want the Bank of Spain is taking an important step forward. Of all existing savings institutions, 45, will end around 15. Bancaja had been relegated to fourth place following the sector ranking is possible that La Caixa, which crystallizes if the operation would be relegated to second place in the classification, is making a move to stay ahead of the sector.

We still have to hear any positive news about the ongoing liquidity scarcity within Spain's financial sector. At last check BVA had trouble accessing CP, while liquidity for secondary institutions was non-existant: most of it, as we have pointed out day after day, is now locked up with ECB overnight deposits.

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Oh regional Indian's picture

Merely a precursor or things to come across all sectors.

All macro-economic indicators point to demand contraction (except from .gov, internationally) and supply contraction. Ouch!

We are going to see an M&A wave like never before.

You don't need too many people to clear inventory.

Cheeky Bastard's picture

Im just wondering is there any way to bet on these consolidations. Some nice profits could be made here. 

Someone should post Paulson&Co holdings when they come out to see if he has taken a position in European banks betting on increased M&A activity. In lieu of recent losses his fund experienced, back-to-basics might be the best thing he could to right now; strategy-wise.

jbc77's picture

And it appears that this will be totally ignored by the markets today. Well boys, just another day living in a real time episode of The Twilight Zone. Except Hitchcock couldn't have written a more strange episode.....At this point the markets are so manipulated that all common sense and fundementals are thrown out the window as CNBC spews buy, buy, buy to the masses.

I need more asshats's picture

The USofA has shown the world that TBTF is the way to go. Free monetary support from tax payers. Mythic smoke and mirror accounting standards. Soon all El Gordo (The Spanish Christmas Lottery) future earning will prolly show up on the TBTF's balance sheet as earnings funneled to them by their friends in the Consejo de Ministros.

Jackfish's picture

Is it possible to allow the insolvent banks to fail and not end up with TBTF survivors?  It doesn't seem like the end result is different under either path.