The Spanish government and the Bank of Spain on Sunday began the country??s first bank rescue in this financial crisis, providing up to ?9bn in liquidity to Caja Castilla La Mancha, a troubled savings and loans institution, and replacing its directors with central bank nominees.
The last time the central bank took over a financial institution was in 1993 when it seized control of Banesto, which was subsequently sold to Santander.
Pedro Solbes, finance minister, said there was ??no other entity? in Spain in similar circumstances and it was wrong to compare the rescue of a large bank such as Banesto with the bail-out of CCM, which accounts for less than 1 per cent of the assets of the financial system.
??The cajas are solvent, as is the financial system,? he said. ??I??m relaxed about the cajas.?
Spain??s government said after an emergency Sunday cabinet meeting that CCM was ??solvent? but had ??liquidity problems? that would be solved by a loan from the Bank of Spain, backed by a state guarantee of up to ?9bn.
Many cajas are heavily exposed to real estate markets in their home regions. CCM has been discussing a merger with Unicaja from neighbouring Andalucia but it became clear during the negotiations that a deal depended on the injection of up to ?3bn of official funds.
