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

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.