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More Spanish Cold Fusion: Second Largest Savings Bank Caja Madrid Now In Merger Talks With 5 Smaller Banks
Remember the prediction that CajaSur was Spain's New Century? Yup, it's accelerating: keep an eye on this trend as it will soon become an avalanche. Can Goldman reverse merge its FDIC subsidiary over to Madrid, to "prevent" the imminent implosion of that banking system?
From Reuters:
MADRID, May 28 (Reuters) - Spain's second largest savings bank, Caja Madrid, is in preliminary merger talks with five regional savings banks, one of the lenders involved in the talks said on Friday.
Caja Avila said it is in talks for a virtual merger with Caja Madrid, Caja Insular de Canarias, Caixa Laietana, Caja Segovia and Caja Rioja.
Earlier, Spain's largest savings bank, La Caixa, also announced merger talks with a smaller regional lender, Caixa Girona.
Following the bailout of savings bank CajaSur last weekend, the Bank of Spain is pushing harder for mergers among small savings banks, whose credit quality has deteriorated sharply due to heavy exposure to Spain's ailing property sector.
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European banks sold $12.6 billion of debt globally this month, the least since at least 1999, Bloomberg data show. The financial primary market in Europe has been “slammed shut” since April 15, according to Suki Mann, head of Societe Generale SA’s credit strategy group in London.
Banks globally may have a capital deficit of more than $1.5 trillion by the end of 2011 and some may require state support, according to Independent Credit View, a Swiss rating company.
Banks “must feel like the lepers of the financial markets,” Mann wrote in a report.
http://www.bloomberg.com/apps/news?pid=20601087&sid=a.ikBGjuWPcs&pos=4
Questions.
What are the assets of all of the Caja's??
Is there any equity in the Caja's?
Why are there none of the big Spanish banks involved like Santander?
I'd venture to guess that Santander and BBVA don't qualify because the Caja's are regional savings banks not full blown commercial banks.
http://en.wikipedia.org/wiki/Savings_bank_(Spain)
Let me add some colour to this since, I have some background in Spain. "Caja's" (translated "boxes" by Google) are a form of savings & loans institutions very traditional to the Mediterranean region (they used to be run by the Church).
They are locally based and are obliged by law to spend a significant part of their profits on charity projects. In exchange they get tax breaks. They used to be very conservative institutions, only investing in local business loans and mortgages, but due to financial de-regulation they can now invest in essentially everything a bank can. La Caixa, in particular is a very large financial institution with international correspondent branches and holdings(it now owns Inbursa in Mexico for example). It also has a separate investment banking unit.
Caja's have a distinct political connotation. They are often run by local political interests and lend heavily to local, municipal interests. Some are directly rumored to be the piggy-banks of Spanish political parties. This is one of the reasons why the sector is much more obscure than Spanish main street banks, and is one of the reasons Caja's ALWAYS get bailed out when in trouble (at least in the past when troubles were more containable). This is literally a phone call in the middle of the night type of merging that is occurring.
As a side note - "La Caixa" the nationalistic Catalan bank is actually legally incorporated as "Caja de Ahorros y Pensiones de Barcelona" in Spanish. (always found it somewhat funny)
tks Arm.
The Bank of Spain has been pressuring the weaker Caja's to merge for what seems an eternity so I'm not clear anything has changed.
See above comment. Bank of Spain did not have the authority to force those mergers, and politicians were not at all keen on forcing it either because of the symbiotic relationship they have with the Caja's. What has changed is that they now are being forced to merge. You will notice that the mergers are mostly ocurring between Caja's that have traditionally been linked to the same political parties and regions.
Spain is completely fucked. Clearly they have been hiding massive losses. I wouldnt be surprised if the whole system is actually insolvent.
Spaniards are lovely people, but they have a habit of going to almost any lengths to hide problems.
I have said it before, and I will say it again; a pack of rabid monkeys could substitute 90% of the people who are working in the banking industry. And I believe we would be in a batter shape than we are now.
well apparently a monkey can predict hurricanes as well as NOAA computers, and that monkey isnt even rabid...as far as i know.
Morning executive meeting in 90% of the banks.
http://www.youtube.com/watch?v=YR71GnQ4CU4
Lol nice vids, they all look a bit like Bernanke.
Concur.
I think it was pointed out in another thread somewhere that Monkeys are much more likely to be responsible with money than politicians and bankers.
How would you say 'arroyo mierda' por favor?
Cajas account for 50% of the whole Spanish financial system
There is no equity in the Cajas. The Board is full of directors elected by politicians.
It is amazing Caja Madrid is going to lead this operation. They are in pretty bad shape. My take is that the Bank of Spain is pushing them. The Bank already tried to push Caja Madrid's takeover of CajaSur last weekend and I imagine is quite hard to say "no" twice to the Central Bank that oversees your operations.
Great insight. Thanks for sharing.
The difference between Spanish banks and US banks is that the Spaniards obviously must like the close relationship between banks and politics?
What a corrupt swamp, too deep to fix. This problem is only getting exposed because of the crisis.
If all the regionals imploded, what's left of Spain's banking system?
Deep in the fires of Mount Doom...they forged a bank..
"One Bank to Rule Them All. One Bank to Find Them. One Bank to Bring Them All and In The Darkness Bind Them."
Most of the Cajas are technically bankrupt
In the last five years they expanded aggressively the balance sheet with mortgages and loans to developers. The Bank of Spain helped them with a very lax recognition of provisions and losses. But it seems the day of reckoning is here.....
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