- CNTV English - CCTV News

Eurozone FinMins approve Spanish banking sector rescue: officials

07-21-2012 01:38 BJT

BRUSSELS, July 20 (Xinhua) -- Euro area finance ministers had given final approval to a banking sector bailout program for Spain of up to 100 billion euros (about 122 billion U.S. dollars), Eurogroup officials said Friday after a conference call.

"We have formally approved the memorandum that lays out the conditions under which Spain can be lent money for the recapitalization of its banks," Luxembourg's Finance Minister Luc Frieden said at a press conference after the conference call.

However, it is still unknown when the bailout loans would be disbursed.

"The approval of all 17 ministers is there, and that means that the program can continue. Money will not flow immediately, because work on the analysis of the specific banks is ongoing," Frieden told reporters.


Under the bailout program, also known as the memorandum of understanding (MoU), the recapitalization needs of 14 banks that make up about 90 percent of Spain's banking system will be evaluated by the second half of September.

An independent audit from two consultancy firms last month showed that the banking sector needed up to 62 billion euros in total. But the result of a second audit and new stress tests is still awaited to determine the exact amount of funding needs of each bank.

According to the MoU, Spanish authorities will have to formulate a new law by the end of November to ensure that savings banks reduce their stakes in commercial lenders to non-controlling levels. Banks that are controlled by the cajas and receive state aid would have to be listed.

Holders of "hybrid capital" and "subordinated debt" in state-rescued banks will be forced to accept a haircut on their investments so that the cost of restructuring to taxpayers can be minimized, according to the MoU.

The bailout loans, an average maturity of 12.5 years and a maximum of 15 years, will be channeled through the eurozone's temporary bailout fund, the European Financial Stability Facility (EFSF), at interest rates of between 3 percent and 4 percent.

The permanent bailout fund, the European Stability Mechanism (ESM), would take over the job of funding the program when it becomes operational.


Olli Rehn, European Union's (EU's) economic and monetary affairs commissioner, said the "unanimous endorsement" by the Eurogroup of the Spanish banking sector bailout "opens the way to the necessary recapitalization and repair of the country's financial sector."

"The aim of this program is very clear: to provide Spain with healthy, effectively regulated and rigorously supervised banks, capable of nurturing sustainable economic growth," Rehn added in a statement after the conclusion of the conference call.

Rehn stressed that the bank restructuring plans would have to "comply fully with EU state aid rules, to ensure that the banks that emerge at the end of the process will be viable entities that will not need further public support."

In parallel, the regulatory and supervisory framework in Spain will be significantly reinforced and consumer protection legislation strengthened, he added.

According to the MoU, Spain will be expected to maintain its commitments to "correct its excessive deficit in a sustainable manner" by 2014 and to adopt the structural reforms set out in the country-specific recommendations.

Rehn said the "explicit link" between these obligations and the bailout program is "deliberate and pertinent."

"It is only through determined action across all of these fronts that Spain can create the financial stability and competitive, dynamic economy that will bring about a steady and lasting fall in unemployment," he added.

Editor:Zhang Jianfeng |Source: Xinhua

Hot Videos view more

The celebrations are still continuing as the victorious coach, Joachim Loew, has been honored for his achievement in his hometown of Freiburg.
Germany coach Loew honored in hometown of Freiburg

Chinese men´s national team continued its preparations for next year´s Asian Cup, as they managed a one-all draw against visitors Jordan during a football friendly in Harbin, the capital city of Northeast China´s Heilongjiang Province.
China held to 1-1 draw by Jordan

The defending world champs came into the contest with a perfect 6-and-oh record, but they would be in for a tough first half before opening things up in the second.
USA beat Slovenia 119-76 in quarter-finals

Hot Stories more

UK authorities believe killer of James Foley is a British national

Across the UK the hunt is on for James Foley’s killer, who authorities believe is a British national. As Richard Bestic reports from London, Prime Minister David Cameron cut short his summer break to lead his government’s response.

Israeli war jets renews Gaza strike as truce talks stalled

Three Palestinians were killed and 40 others wounded in the intensive Israeli war jets´ airstrikes on the Gaza city on Tuesday night, shortly before an end of a 24-hour ceasefire in the Gaza Strip,

Missouri police arrest dozens after violent night

As the protests in the town of Ferguson, Missouri turned violent with police facing ´heavy gunfire´ from some ´criminal elements´, cops fired tear gas, stun grenades and arrested 31 demonstrators on Monday night.

Picture in news more

More Video News

Choose TV Program