UPDATE 2-Bank of Spain takes control of savings bank CajaSur

* CajaSur merger plans with Unicaja fail

* CajaSur will have access to FROB funds

* FROB to provide 500 mln euro -source

(Adds source on financing, paras 6 and 7)

By Jesus Aguado

MADRID, May 22 (BestGrowthStock) – The Bank of Spain said on
Saturday it had taken over the running of Spanish savings bank
CajaSur after its planned merger with another of the country’s
small lenders failed.

CajaSur will now have access to the Fund for Orderly Bank
Restructuring (FROB), the Bank of Spain said in a statement.

“This action, which we have taken as a result of the
viability problems presented by CajaSur and the impossibility of
closing its merger with Unicaja, will guarantee that it can
continue to operate and fulfil its obligations,” the central
bank said.

CajaSur accounts for nearly 0.6 percent of Spain’s financial
system’s assets, which will not be affected in any way by the
intervention, the Bank of Spain said.

The FROB, with a funding capacity of up to 99 billion euros
($123.8 billion), was set up by the government last June after
the Bank of Spain was forced to take over the running of savings
bank Caja Castilla de la Mancha. [ID:nMDT006230]

A source close to the deal said the FROB would provide at
least 500 million euros in financing to bolster Cajasur’s
balance sheet.

“The lack of capital in Cajastur is estimated to be somewhat
more than 500 million euros and that is at least the amount of
capital the FROB will provide, apart from liquidity to be made
available to the bank,” the source said.

Spanish banks have overall weathered the global financial
crisis thanks to strict regulatory oversight, but the bursting
of a decade-long housing bubble has left them with a more than
300 billion euros debt hangover.

The country’s largely unlisted savings banks — accounting
for about half of the financial system — are most exposed to
struggling property developers and have seen their capital
eroded by soaring bad loans.

About one third of the regionally-controlled savings banks
have merged, with another third in the process of merging.

The Bank of Spain has set a target to cut the number of
savings banks to about 15 from 45 by mid-year.

Stock Market Research Tools
(Writing by Judy MacInnes and Martin Roberts; Editing by Mike

UPDATE 2-Bank of Spain takes control of savings bank CajaSur