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| Spain banks restructuring gets green light in Brussels | Spain banks restructuring gets green light in Brussels |
| (about 1 hour later) | |
| The European Commission has approved the Spanish government's plans to restructure four troubled banks. | |
| Bankia, Banco de Valencia, NCG and Catalunya Banc were nationalised after experiencing heavy losses on loans to homebuyers and property developers. | Bankia, Banco de Valencia, NCG and Catalunya Banc were nationalised after experiencing heavy losses on loans to homebuyers and property developers. |
| Banco de Valencia is to be sold to Caixa Bank, a privately owned lender. | |
| The other three must cut the total size of their loans and investments by more than 60% over the next five years under their restructuring plans. | The other three must cut the total size of their loans and investments by more than 60% over the next five years under their restructuring plans. |
| "Our objective is to restore the viability of banks receiving aid so that they are able to function without public support in the future," the European Competition Commissioner Joaquin Almunia said. | |
| Shrinking banks | |
| The Commission's approval opens the way for Spain's government to draw on a 100bn-euro (£81bn; $129bn) loan made available by the eurozone's bailout fund specifically for the purpose of cleaning up the country's banks. | |
| Shrinking the size of the three banks remaining in state ownership will allow them to repay the rescue loans they have received from the European Central Bank, via the Spanish central bank. | |
| They will do this in part by selling their most problematic loans to Sareb - the Spanish government's "bad bank", which will be responsible for seeking to recover as much of their value as possible in order to mitigate the cost to taxpayers of rescuing the banks. | |
| The banks will no longer be allowed to lend to property developers, and must refocus their business on loans to Spanish households and to small and medium-sized businesses. | |
| During the restructuring period, the banks will be banned from making interest payments to certain investors or from acquiring other companies, and employee pay at the banks will be capped. | |
| The three banks remaining in government ownership are meant to be sold off by Madrid before the end of the five-year period. | |
| According to the European Commission, some 10bn euros of the restructuring cost must be borne by investors in the banks - which is expected to include the requirement that some lenders to the banks accept a reduction in the amount owed to them. | |
| The allocation of losses to these investors is controversial in Spain, as they include many ordinary Spaniards who were sold "subordinated" or higher-risk debts of their banks as a savings product. | |
| Banco de Valencia was in the worst shape of the four, meaning that a sale to another bank was the only way of recovering any value from the business. | |
| Bankia, the biggest of the four banks, was created in 2010 from the merger of seven troubled regional savings banks. | |
| The plans had also been approved by the Spanish central bank on Tuesday. | The plans had also been approved by the Spanish central bank on Tuesday. |