Another Spanish Bank Fails

As I reported on April 4th 2009 ("Spain Bails Out First Bank" - hard to believe over one year ago!), the bailout of Caja de Ahorros Castilla La Mancha (known as CCM) by Spain’s central bank, served as the canary in the coal mine that significant problems resided in the country’s banking system. This was particularly the case for the nation’s cajas (small, mutually owned banks controlled by depositors, employees, religious organizations and politicians), which had grown their market share from 10% to nearly 50% and continued to lend aggressively in 2006 and 2007, even as Spain's larger banks pulled back.


Over the weekend, we received another data point highlighting Spain’s troubled banking sector, when the central bank took over a Church-controlled savings bank, CajaSur. While the bank accounts for only .6% of the nation’s banking assets, future takeovers and forced mergers are imminent. In fact, yesterday four savings banks – Caja de Ahorros del Mediterraneo, CajaStur, Caja Extremadura, and Caja Cantabria – signaled their intent to eventually merge their operations. By consolidating, the banks are likely to receive financial support from Spain’s central bank, which will be necessary to sustain their operations.