Brussels, 03/09/2012 (Agence Europe) - On Monday 3 September 2012, the European Commission said that it fully agreed with the approach taken by the European authorities to raise funds from the Spanish FROB bailout fund to cover the immediate needs of nationalised Spanish bank BFA-Bankia, rather than making use of the aid promised to Spain by the eurozone.
On Friday, BFA-Bankia admitted losses of over four billion euros for the first half of 2012 and core funding of 6.3%. Eurogroup says this confirms the importance of the aid of up to €100 billion promised by the eurozone for recapitalising Spanish banks (see EUROPE 10660). In a press release, Eurogroup said BFA-Bankia would be one of the main beneficiairies of the aid and welcomed the plans of BFA-Bankia management and the Spanish government to submit a full restructuring plan by mid-October, for the Commission to validate in November.
Eurobonds. Spanish prime minister Mariano Rajoy will be meeting German Chancellor Angela Merkel in Madrid on Thursday. In an interview with several European newspapers, he called for the gradual introduction of eurobonds in three stages. In 2013-2014, greater convergence in budget and economic policy; in 2015-2016, the creation of a European bank authority to monitor national budgets and the launch of the first eurobonds in the medium- and long-term, guaranteed by the member states; and in 2017-2018, the setting of binding budget targets for eurozone members and the common issuing of eurobonds.
Bank reforms. Last week, EU Euro Commissioner Olli Rehn welcomed the passing of bank reforms by the Spanish government (see EUROPE 10673). The law is a key element of the financial aid programme, which will help the bank supervisory body, Banco d'España, to intervene as early as possible to forestall potential bankuptcies. It increases the required core funding for banks to 9%. The government has also introduced a 'bad bank' to buy up toxic assets, manage them and then sell them off at least a decade later. Ahead of new bank restructuration legislation, the new law requires unprotected lenders to assume their losses themselves. Olli Rehn commented: 'The law constitutes a key element in the programme and its adoption today sends an important signal of Spain's determination to comply fully with the requirements and timeframe set out in the Memorandum of Understanding. The law provides the necessary legal basis to effectively carry out a comprehensive restructuring of those Spanish financial institutions that are in need of external support, including the effective segregation of impaired assets from bank balances and their transfer into a separate Asset Management Company.' (MB/transl.fl)