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Spain's Guindos Expects More Bank Mergers, Cleanups

Spanish Economy Minister Luis de Guindos said he expects more bank mergers and efforts to clean up balance sheets, reiterating the nation won’t seek a European bailout for its lenders.

“In the coming days, I think we will see additional operations in terms of mergers and acquisitions and the consolidation process in the banking sector and additional efforts by the banks to restructure and clean up,” he told reporters today after meeting with German counterpart Wolfgang Schaeuble in Santiago de Compostela, Spain.

Less than three months after tightening rules to force lenders to recognize deeper real-estate losses, Spain is seeking new ways to convince the bond market that bank losses won’t overburden public finances. The economy is back in a recession, data showed today, as the jobless rate nears 25 percent, piling additional pressure on banks suffering from the collapse of the real-estate boom.

Guindos said allowing lenders to separate off real estate assets for which they have already made provisions “makes sense” and is “positive” for banks as it would free up capital and allow them to concentrate on business. Speaking at a news conference, he gave no more details about the plan, which officials first announced a week ago.

Spain is in the midst of its third effort to clean up the banking industry since the bubble burst in 2008. In February, the government increased the ratio of provisions to be set aside for land to 80 percent, while raising the ratio on unfinished developments to 65 percent and to 35 percent for other troubled assets including finished houses. The new provisioning rules cover about 180 billion euros ($238 billion) of assets.

To contact the reporters on this story: Emma Ross-Thomas in Madrid at erossthomas@bloomberg.net; Charles Penty in Madrid at cpenty@bloomberg.net

To contact the editors responsible for this story: John Fraher in Madrid at jfraher@bloomberg.net; Frank Connelly at fconnelly@bloomberg.net

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