Failed CajaSur Fallout Accelerates: 4 Spanish Savings Banks To Merge In "Cold Fusion", €135 Billion In Assets At Stake

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Reuters and Bloomberg report that 4 Spanish savings banks are set to merge, likely as a result of the pent up fallout from the failure of CajaSur, which as we noted earlier, was taken over by the Bank of Spain. The culprit it appears is Caja de Ahorros del Mediterraneo which is merging with 3 other banks, Caja de Ahorros de Asturias, Caja de Ahorros de Santander y Cabria and Caja MP de Extremadura, to prevent a collapse. Since Spain apparently lacks the FDIC's tender wealth redistribution hand, it is still unclear whether the transaction will obtain government funding. Just as the subprime collapse started with a few names toppling, this could easily be the start of implosion of the allegedly insolvent Spanish banking system.

More from Reuters:

MADRID, May 24 (Reuters) - Three Spanish regional savings banks, led by Caja de Ahorros de Mediterraneo said on Monday they have reached a preliminary agreement to merge some of their operations.

The agreement, which also includes Caja de Ahorros de Asturias and Caja de Ahorros y Monte de Piedad de Extremadura, would aim to create a joint banking group that allows to "strengthen solvency and assets of the participating banks."

And here is the original source from valenciaplaza.com (h/t @vctrjmnz), via Google translate:

CAM provides a 'cold fusion' with CajAstur, Caja Cantabria Caja Extremadura and by SIP

The entities have agreed today the launch of the Institutional
Protection System, which has been submitted to the Bank of Spain and
must be approved by the boards of directors of each entity.
The group added more than 135,000 million in assets, with a network of 2,300 offices and employs around 14,000 employees

 

Caja
Mediterráneo, Grupo Cajastur (in the process of integration of banking
business of CCM), Caja Caja Extremadura and Cantabria have agreed to
promote the creation of a SIP (Institutional Protection System) which
will create the third largest financial group in Spain boxes and fifth
Spanish financial industry group, with a volume of assets in excess of
135,000 million euros and a turnover of around 177,000 million euros,
in which each box retains its legal personality, its retail business
regionally and their governing bodies and independent social work,
pooling risk policies, cash flow, credit rating, internal control and
regulatory requirements.

The presidents and CEOs of banks have signed
today a Memorandum of Understanding has been submitted to the Bank of
Spain and shall be subject to approval by the respective boards of
directors.

The
purpose of the agreement is to establish a consolidated group of credit
institutions required to set up a financial group with ambitions to
become one of the main groups in the Spanish financial system and
strengthen the solvency of the participating institutions, anticipating
future requirements of Basel III .

The new
group will gather boxes financial assets of more than 135,000 million
euros, thus becomes the third party boxes and the fifth Spanish banking
sector entity.
The sales network will continue to
operate in each territory with the current record of each entity in its
natural territory, so that Caja Cantabria, Cajastur, Caja Mediterráneo,
Caja Extremadura and CCM retain their badges.

The entities have
opted for the creation of a SIP to get the benefits of integration
while maintaining the independence of each of the institutions and
decision-making at local level, both in the field of retail business
and in social work.

The SIP
of the four entities can strengthen the supply of services to bank
customers throughout the national territory and loan investment in
their traditional territories.

The grouping of these
entities is a risk diversification, both geographical and sectoral
levels and lack of overlap of clients, which will allow greater
opportunities for businesses and families in their homelands.
The complement of
commercial and office networks represents a strengthening of activity
in major markets such as Madrid, Catalonia, Andalusia and Galicia, one
of the positive factors of the agreement, in which each participating
entity retains its personality and employment levels in their networks
natural.

All indicators of the merged entity located in the new
group as one of the more efficient and sound of the Spanish financial
system.
The SIP will bring together an active volume of over 135,000 million
euros, with a turnover of 177,000 million euros and computable equity
of over 10,000 million euros.
The SIP part with a solvency ratio of 12.1% (according to 31/12/2009). The network currently totals some 2,300 offices and the combined workforce of around 14,000 employees. The investment portfolio has a value of EUR 4,000 million in the aggregate balance sheet.

The SIP will take the opportunity of
following the rules of the Bank of Spain in this respect, go to Frob in
an amount to be specific.

The SIP, as the
Memorandum of Understanding, is articulated as a Madrid-based bank,
which is responsible for policies and business strategies of the group,
and the levels and measures of internal control and risk management of
all of them .
Thus, the new entity will assume the
responsibility for financial management, management of assets,
liabilities, cash management, shareholding, risk, operations and
systems and products, while each maintains its legal case, their
regional retail business, their governing bodies and independent social
work.

The new entity will have a board of twelve members. Modesto Crespo, president of CAM
International, will chair the new entity, Victor Bravo, president of
Caja Extremadura is senior vice president, Henry Ambrose, president of
Caja Cantabria, is second vice president and president of Cajastur
Manuel Menendez, will be CEO.

Group members Entities assume a mutual
commitment to solvency, one hundred per cent of the resources of each
participating entity and liquidity, through the creation of a global
treasury system.
The SIP was created with an indefinite duration and the constituent entities will share one hundred percent of profits.

The SIP will be participated by
40 percent for Caja Mediterráneo, 40 percent Cajastur Group, 11 percent
by Caja Extremadura and 9 percent by Caja Cantabria.

Once approved by the
respective boards and after obtaining all relevant administrative
authorizations, will begin activities to formalize the group's creation
and development of joint project.