The Spanish government and the Bank of Spain yesterday began the country’s first bank rescue in this financial crisis, providing up to €9bn ($11.9bn) in liquidity to Caja Castilla La Mancha, a troubled savings and loans institution, and replacing its directors with central bank nominees.
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% of the assets of the financial system.
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.
Spanish commercial banks and cajas, unlisted entities usually controlled by regional politicians, had escaped the worst effects of the crisis because of the Bank of Spain’s restrictions on off-balance-sheet assets and its insistence on large bad loan provisions during profitable years. But the severity of Spain’s property crash is affecting the financial system following the collapse of indebted property developers and rising mortgage defaults.