In the context of the restructuration of the Spanish financial system and as foreseen by the Memorandum of Understanding (MoU) agreed between Spain and the Eurogroup in July 2012, the European Commission announced yesterday the approval –for the purposes, among others of State Aids rules- of restructuring plans of the four Spanish banks participated by the State, through the Spanish Fund for Orderly Bank Restructuring (FROB), which are BFA/Bankia, NCG Banco, Catalunya Banc and Banco de Valencia. The Commission’s approval will allow the banks to receive aid from the European Stability Mechanism (ESM) in the context of the financial assistance programme to recapitalise the Spanish banking sector, which has been estimated in 37 billion euros.
Among the four banks, it has been considered that only Banco de Valencia’s viability could not be restored on a stand-alone basis. The full integration of Banco de Valencia in CaixaBank, after a competitive tender process, has been announced this week.
In the case of the other three banks, BFA/Bankia, NCG Banco and Catalunya Banc, it is considered that the proposed restructuring measures will ensure their return to a long term viability.
Such banks committed to measures that include:
- The balance sheet of each bank will be reduced by more than 60% by 2017.
- The banks will refocus their business model on retail and SME lending in their historical core regions.
- They will exit from lending to real estate development and limit their presence in wholesale business.
- Real estate assets transfer to Spanish Bad bank (SAREB).
- Transfer of industrial stakes and subsidiaries.
- BFA/Bankia and Catalunya Banc will divest their trading/treasury portfolio of fixed-income securities. Catalunya Banc will also divest all of its venture capital funds.
- Limitations on remunerations Furthermore, FROB is expected to sell NCG Banco and Catalunya Banc before the end of the five year restructuring period. Should a sale fail, Spanish authorities will present an orderly resolution plan.
We enclose a link to the European Commission press release [See link]
The concrete plans for each bank have not been yet made public by the European Commission, however, BFA/Bankia presented yesterday its strategic plan 2012-2015 [See link], and NCG Banco advanced general guidelines of its plan [See link (Spanish)]
Garrigues has advised the FROB before European Commission in respect to State Aids. Our firm has been providing such advice to the FROB since its incorporation in 2009 in connection to all restructuring processes.