Spanish banks will need £50bn to weather euro storm, say auditors

SpAin’S troubled banks could need as much as €62 billion (£50bn) in new capital to protect themselves from economic shocks, according to independent auditors hired by the government to assess the country’s struggling financial sector.

The Spanish government will use the auditors’ report as the basis for their application for a bailout loan from the 17 countries that use the euro. Announcing the findings yesterday, deputy Bank of Spain Governor Fernando Restoy said this worst-case scenario was far below the €100bn loan offered by eurozone finance ministers two weeks ago. Spain’s banking sector is struggling under toxic loans and assets from the collapse of the country’s property market in 2008.

Concerns that Spain could not afford the cost of propping up its banks without the help of an international bailout has sent its borrowing costs soaring to levels not seen since it joined the European single currency in 1999.

Eurozone finance ministers were meeting in Luxembourg last night to discuss a possible bailout, along with proposals from the G20 for a banking union in the currency zone as a precursor to closer political union. The audits of Spain’s lenders, carried out by consultancies Roland Berger and Oliver Wyman, covered 14 banking groups that account for 90 per cent of the sector in Spain.

The country will use the reports’ findings to decide how big a bailout loan to ask for.

Mr Restoy and deputy economy minister Fernando Jimenez Latorre declined to outline individual banks’ needs.

in the auditors’ stress test for the worst-case economic scenario – a fall in gross domestic product of 6.5 per cent over the period 2012-2014 – most of the banks were deemed to be in a “comfortable” stoy said.

“We’re not talking about the imperative capital necessities of the banks,” he said.

“We’re not talking about someone urgently needing such and such an amount of capital to deal with their obligations.

“We’re talking about the capital that would be needed if we were to see a situation of extreme tension which is very unlikely to come about.

“We should keep in mind we are not talking about how much capital an entity needs to survive. We’re talking about how much capital an entity will need to confront a situation of extreme stress.”

Economy minister Luis de Guindos said a formal petition would be made within few days.

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Eurozone finance ministers offered Spain a bailout loan of up to €100 billion on 9 June. The terms of the loan have still to be negotiated.

irish finance minister Michael noonan said the uncertainty is hitting markets.

“While there’s no request, and while there’s no certainty about the amount being requested, i think that makes the market jittery,” Mr noonan said into last night’s meeting.

A more thorough series of audits by four other companies is scheduled to be completed by the end of July.

Oliver Wyman inc, gave a worst-case range of €51bn to €62bn in new capital needs while Roland Berger Strategy Consultants GmbH gave a single figure of €51bn. THE new Greek government has issued a challenge to the other members of the eurozone, vowing to renegotiate the tough austerity measures linked to its bailout.

As new Democracy leader Antonis Samaras unveiled his 18-member cabinet in a three party coalition he demanded changes to the deal.

national Bank chairman Vassilis Rapanos was named finance minister and new Democracy deputy leader Dimitris Avramopoulos became foreign minister. Mr Samaras’ comments come after David Cameron and Barack Obama put pressure on Germany at the G20 to be more generous in supporting the struggling peripheral member of the eurozone.

Yesterday, eurozone finance ministers discussed whether to give Greece more time to make the cuts it has to bring in.