by Graham Summers
Gains Pains Capital
In a previous article I began delving into the toxic sewer that is the Spanish banking system. At the root of the problem is the previously unregulated Spanish cajas or regional/ local banks which own as much as 56% of all Spanish mortgages.
To give you an idea of how bad things are with the cajas, consider that in February 2011 the Spanish Government implemented legislation demanding all Spanish banks have equity equal to 8% of their “risk-weighted assets.” Those banks that failed to meet this requirement had to either merge with larger banks or face partial nationalization.
The deadline for meeting this capital request was September 2011. Between February 2011 and September 2011, the number of cajas has in Spain has dropped from 45 to 17.