Spanish minister plays down banking weakness

25 January 2011

Spain's finance minister Elena Salgado has moved to dampen speculation over the weakness of the country's financial sector, claiming any capital shortfall can be covered by a government-backed emergency fund.

The New York Times reports that Ms Salgado also revealed that Spanish banks would be forced to have core Tier 1 capital of at least eight per cent by autumn this year and insisted their combined shortfall was no more than €20 billion ($27.3 billion).

Ms Salgado also sought to play down fears that cajas - the nation's smallest savings banks - would struggle to raise private funds without the need to dip into the FROB, the national restructuring fund.

"We believe that there will be entities that will find private financing," she told reporters in Madrid. "But if entities don't find capital, the FROB will put up this capital, so that means complete security."

Last week, it was announced that Santander chief executive Alfredo Saenz could face a lengthy ban from banking activity, after being accused of making false accusations against a string of debtors.

By Claire Archer

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