Spain will formally request European Union aid for its struggling banks in the coming days and the euro-region’s permanent rescue fund would be the ideal vehicle to provide the support, Economy Minister Luis de Guindos said.
The request is now a “mere formality,” de Guindos said in Luxembourg before the start of a meeting of euro-area finance ministers. Details of bank stress tests to be released later today will eliminate doubts about the lenders and bring “transparency” about just how much money they will need, he said.
Spain’s Economy Ministry is set to announce today in Madrid just how much capital its banks need as it publishes the results of an audit carried out by consultants Oliver Wyman and Roland Berger. De Guindos said he will use those reports to help determine how much of the 100 billion-euro European loan the nation will tap.
The most important thing now is the result of the stress tests and “the different steps” needed to carry out the capital injection for some Spanish banks, he said.
While details on how the lenders will receive the aid have yet to be determined, De Guindos said the European Stability Mechanism, which is due to come into effect next month, would be the ideal vehicle to provide the capital to his country’s banking system.
“As you know, the permanent mechanism will in theory start working in the coming days and in a way it is ideal to inject capital into the banks,” he said. “By the end of July we will have a very clear and detailed idea of how the process will be carried out.”
Using the ESM may mean the loans would have preferred status over other Spanish debt in case of a default, which could make Spanish government bonds less appealing.
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