All change for cajas but funding fears persist

The future shape of the Spanish banking system began to emerge as the Bank of Spain agreed to another Eu8bn in funding for the integration of a further 17 savings banks although some questioned the value of the restructuring. The approvals bring the total that the Fund for Orderly Bank Restructuring (FROB) will inject into merging savings banks (cajas de ahorros) to Eu10.2bn, and raises the number of cajas restructuring to 39. With the deadline for applications for FROB funding having ended, and the cut-off for submitting new restructuring proposals ending earlier, few further changes are expected. Moody's has most Spanish banks and cajas on negative watch, and, in its first rating for one of the new entities, Caixa d'Estalvis de Catalunya, Tarragona i Manresa, the agency said the operating environment would throw up challenges. The merger of Caixa Catalunya, Caixa Tarragona and Caixa Manresa, approved by the Bank of Spain in March, with Eu1.25bn of FROB support, was credit positive, the agency said when it assigned an A3 rating with negative outlook. Three of the entities approved will be alliances through so-called Institutional Protection System (SIP) programmes, meaning each bank will keep its identity and branding, while the fourth is a straight merger.