April 11 (Bloomberg) -- The Spanish government and banks are talking about a formula to fund the state’s deposit-guarantee fund so that it can keep supporting the sale of failed lenders, said Jose Antonio Garcia Cantera, chief executive officer of Banco Espanol de Credito SA.
The solution may mean the fund is recapitalized in such a way that banks won’t have to book further contributions against earnings, Cantera told reporters in Madrid today. Spanish Deputy Economy Minister Fernando Jimenez Latorre said at the same event that the government was still considering options for boosting the fund.
Spain has used the deposit-guarantee fund, which is underwritten by the country’s banks, to help finance the sale of failed lenders, including Caja de Ahorros del Mediterraneo, without passing the cost to the government. The process has sapped the fund’s reserves, causing doubts about whether it has the resources to support the sale of other lenders, including CatalunyaCaixa and Banco de Valenca.
“Between all of us the right solution will emerge,” said Cantera, adding that a final formula hasn’t been agreed. “What’s clear is that money will have to be brought forward because at the moment it’s not there.”
The government used the fund to inject 5.25 billion euros ($6.9 billion) into Caja de Ahorros del Mediterraneo when it agreed to sell it to Banco Sabadell SA in December. The fund will also absorb 953 million euros of costs related to the sale announced last month of Unnim, another bailed-out bank, to Banco Bilbao Vizcaya Argentaria SA.
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