Spain rescues its first bank

by Gill Montia

Story link: Spain rescues its first bank

Spanish authorities have reluctantly rescued their first bank.

News of the imminent collapse of Caja de Ahorros Castilla La Mancha (CMM) emerged over last weekend, since when the country’s central bank has taken control of the regional lender.

The bail-out package involves a cash injection plus €9 billion in loan guarantees.

The Spanish banking sector has prided itself on its performance during the credit crisis, with Santander leading the field untroubled by the massive writedowns forced upon many of its European rivals struggling with toxic assets.

However, the collapse of the country’s property market will have left a number of regional banks exposed.

The Spanish housing market remains a mystery unto itself with local statistics widely questioned by commentators.

However, house prices are falling and last month, Reuters reported that Goldman Sachs had warned Spanish banks were at risk of deteriorating credit quality because of real-estate sector problems and rising unemployment.