THE SPANISH government is to establish a €90bn (£77bn) fund for its financial institutions, while Russia is pondering a similar rescue package for its own banks.
Spain’s cabinet meets today and is likely to approve a proposal which will see lenders, including those who are not deemed to have capital shortfalls, given access to a fund intended to provide liquidity to grease the wheels of the country’s financial sector.
Any banks using the fund will be subjected to scrutiny to see if they should be merged, while institutions hoping to use more than €27bn of the fund will require government approval to do so.
Spain’s banking system has emerged healthier than most from the financial crisis due to tighter controls on risk, but savings banks have suffered from the collapse of the country’s property sector, as developers default on loans.
The fund is aimed at providing such banks with access to funds which they are unable to secure on the markets and follows hot on the heels of credit rating agency Moody’s decision to downgrade 30 Spanish lenders.
Meanwhile, Russia is on the verge of initiating its own banking bailout, over fears that mounting loan defaults could cripple the country’s financial sector.
Under proposals to be discussed today, the government is likely to echo the UK’s bailout by recapitalising financial institutions in exchange for equity stakes and places on the boards of rescued lenders.
The Russian central bank has previously forecast that the banking system may need up to 500bn roubles (£9.85bn) in the event that the ratio of non-performing loans on banks’ balance sheets reaches 10-12 per cent, from its current level of 4 per cent.
Russian deputy Prime Minister Igor Shuvalov said earlier this week that he did not envisage non-performing loans reaching 10 per cent.
But he insisted that the government had enough cash reserves to provide sufficient capital in the event of such deterioration.