Cajas Have Heavy Exposure to Troubled Real-Estate Assets

Spain's central bank said the country's ailing savings banks are holding about €100 billion ($136.86 billion) in "potentially problematic" real-estate assets, the first time it has put a number on the extent of those holdings, The Wall Street Journal reported. The figure was disclosed as the head of the Bank of Spain voiced support for the government's plan to boost the solvency levels of those banks, known as cajas. "This [plan] was absolutely necessary," Miguel Ángel Fernández Ordóñez told journalists Monday in his first public comments since the government announced its plan to recapitalize the savings banks, which account for 42% of the country's banking assets and have been particularly hard hit by the collapse of a decade-long construction boom. The Bank of Spain has previously estimated that the overall banking sector holds €180 billion in problematic real-estate assets—loans that are already in default, still-performing but risky loans and repossessed assets. The government on Friday approved new rules that impose minimum capital ratios of 8% for all the country's banks, and even higher ratios for the cajas. It reiterated its estimate that all the banks will need to raise about €20 billion to meet the new requirements, a figure many analysts describe as too low, and said it will take stakes in lenders that fail to do so by September through its Fund for Orderly Bank Restructuring, also known as FROB. The government, however, has offered some flexibility on the September deadline. The Bank of Spain will allow lenders on a case-by-case basis until December to close stake sales to private investors and will give them until March 2012 to hold initial public offerings. This flexibility on the deadline, which was announced in January, was viewed as a sign of weakness on the part of many analysts. Read more. (Subscription required.)