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Spain Says CAM Savings Bank Rescue Cost May Reach $21 Billion

A Caja de Ahorros del Mediterraneo Branch Stands in Madrid
Banco Sabadell SA bought the failed savings bank known as CAM for 1 euro after Spain’s deposit-guarantee fund, financed by the nation’s banks, injected 5.25 billion euros into the lender and offered guarantees against certain assets souring, shielding the national budget from losses. Photographer: Denis Doyle/Bloomberg

Jan. 14 (Bloomberg) -- Spain’s 2011 bailout of savings bank Caja de Ahorros del Mediterraneo may cost as much as 15 billion euros ($21 billion) because its assets performed worse than expected, Economy Minister Luis de Guindos said.

Banco Sabadell SA bought the failed savings bank known as CAM for 1 euro after Spain’s deposit-guarantee fund, financed by the nation’s banks, injected 5.25 billion euros into the lender and offered guarantees against certain assets souring, shielding the national budget from losses.

De Guindos said yesterday the assets included in the so-called asset-protection plan had performed worse than predicted, and the total cost of the cleanup may amount to as much as 15 billion euros. By comparison, Bankia SA, the lender whose nationalization in 2012 pushed Spain to seek a European banking bailout, took 18 billion euros of European rescue funds and transferred about 22 billion euros of real estate-linked assets to the nation’s so-called bad bank.

The additional costs for CAM, based in Alicante, southeastern Spain, will be borne by the deposit-guarantee fund, not the taxpayers, an Economy Ministry spokesman said.

In the 2011 deal, brokered in the last weeks of Spain’s previous, Socialist government, the deposit-guarantee fund recapitalized CAM, which had run up losses of 1.73 billion euros in the first nine months of the year. The fund then agreed to guarantee 80 percent of losses that may arise from 24.6 billion euros of problem assets, Sabadell said at the time.

To contact the reporters on this story: Esteban Duarte in Madrid at eduarterubia@bloomberg.net; Emma Ross-Thomas in Madrid at erossthomas@bloomberg.net

To contact the editor responsible for this story: Stephen Foxwell at sfoxwell@bloomberg.net

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