Spain needs up to $78b to recapitalize banks

MADRID - Spain needs up to 62 billion euros (about $78 billion) of aid to recapitalize its banks, international auditors said Thursday.

A woman stands next to a sign for bingo that reads "Do you like to win?" in Madrid June 21, 2012. Spain's banks would need between 51 billion and 62 billion euros ($64-78 billion) in extra capital to weather a serious downturn of the economy and new losses on their books, two independent audits of the sector showed on Thursday. [Photo/Agencies]

It is the finding of the independent consultants, Oliver Wyman and Roland Berger, who were charged with investigating the condition of Spain's banks following the government's nationalization of the country's fourth biggest bank Bankia in May.

Bankia needed aid as a consequence of its exposure to bad debts, a problem that affects many of Spain's financial entities.

Roland Berger gave a precise figure for the needs of Spain's banks, saying they require 51.8 billion euros, while Oliver Wyman was less specific, estimating a figure of between 51 billion euros and 62 billion euros.

The data was made public in a press conference fronted by the Sub-Director of the Bank of Spain Fernando Restoy and the Secretary of State for the Economy Fernando Jimenez Latorre.

The banks which will require most aid are Bankia, Catalunya Caixa and Novacaixagalicia and Banco de Valencia, although the details of each banks individual needs was not published.

That will be done in September after an audit which is being carried out by the companies, Deloitte, KPMG, PwC and Ernst&Young.

This data was due to be published at the end of July, but it was confirmed on Tuesday that the findings would be delayed as a result of the need for an indepth study.

Restoy said that none of Spain's three biggest banks, Banco Santander, Caixabank or BBVA, need additional capital and commented that the auditors had based their calculations on the assumption that Spain's GDP will fall by 6.4 percent by 2014 and house prices will drop by 60 percent.

"It is the most adverse scenario that we could have imagined," said Restoy.

The figures published on Thursday are considerably more pessimistic than the 40 billion euros estimated by the International Monetary Fund (IMF) on June 9, but still fall below the 100 billion euros envisaged as a worst case scenario by risk assessment agency Fitch's.

These results will now form the basis of the calculations that the Spanish government will carry out to decide how much money it will ask as a bailout from the European Union (EU).

Spain's Economy Minister Luis de Guindos said earlier in the day that the government would not ask for the bailout this week, but that it would do so "in the next few days."

The EU is willing to loan up to 100 billion euros to recapitalize Spain's banks. (1 euro = 1.27 U.S. dollars)