The government created a so-called bad bank to take over tens of billions of euro in defaulted loans and unsaleable property and to accelerate the clean-up of the banking sector, said economy minister Luis de Guindos.
The bad bank will begin operating in late November or early December, will exist for between 10 and 15 years, and is intended to be profitable over that period so that Spanish taxpayers do not bear the burden of the bank rescue operation.
“The prices of these assets [that banks transfer to the bad bank] must ensure that the entity does not generate losses during its lifetime, something that is very important to minimise the impact on taxpayers,” de Guindos told a news conference.
De Guindos also announced new rules for quicker and easier government takeovers of problem banks, a cut in pay for executives at banks that have been rescued by the state, and regulations that will keep banks from selling complex securities to unsophisticated investors.
Spain asked for a European rescue for its banks in June after it took over Bankia, a large lender that was particularly exposed to the property market, and found that it needed €19bn to cover its losses.
De Guindos said Bankia could get emergency liquidity from the government before the European rescue funds are disbursed.
With its banking rescue barely underway, Spain is already under pressure to ask Europe for a full sovereign bailout as its borrowing costs remain painfully high and recession and high unemployment are hindering its drive to cut the public deficit.
Countries such as Sweden have used bad bank structures to rescue their financial sectors, but the Spanish version is not modelled on any specific predecessor.
At least four Spanish banks, all of which have already been taken over by the government, are set to receive aid money under the rescue measures.
A number of other banks are also expected to need aid, though they will not be named until late Sep, after an independent audit by the big-four global accounting companies.