On July 25, the Wall Street Journal reported Bank of Spain to Take Over CAM

Spain’s central bank said Friday it decided to take over Caja de Ahorros del Mediterraneo as the country’s plans to clean up its ailing savings banks enter their final phase.

Spain’s Fund for Orderly Bank Restructuring, or FROB—which is controlled by the central bank—will take over the management of CAM, inject €2.8 billion ($4 billion) of new capital and prepare to sell it on to another institution. It will also give CAM a €3 billion credit line to ensure it has sufficient liquidity to meet all its obligations.

“As a result, creditors and depositors can be completely at ease,” the Bank of Spain said in a statement.

CAM had already requested €2.8 billion in new capital to meet new minimum solvency requirements the Spanish government set earlier this year, which meant that the FROB would have a large stake in the bank. But the Bank of Spain’s decision to take over the institution and prepare it for sale signals it believes CAM is no longer a viable stand-alone entity.

CAM Lost €1.1 billion in Recent Announcement

Please consider CAM lost 1.136 billion, delinquencies reached 19%

It do not take long for CAM to blow much of that €2.8 billion injection.

  • CAM informed the National Securities Market of a loss of 1,136 million euros in the first six months of the year.
  • The non-performing-loan ratio was 19% as of June 30, 2011 compared to of 9.1% in December 2010.

CAM is tiny relative to all the other European bank issues. However, the important point is to expect to see more Spanish bank implosions because they are coming.

Mike “Mish” Shedlock
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