Spain Banking

About Spain Banking

Spain restructured its savings banks, called cajas, after the 2008 property collapse. The cajas had lent heavily to property developers. When real estate prices collapsed, the cajas faced massive losses. The Spanish government created the FROB fund to restructure the banking sector. The number of cajas was reduced from 45 to approximately 10 through mergers. Bankia, created from the merger of seven cajas, required 23.5 billion in state aid. Spain requested European assistance in 2012 and received 41 billion for its banking sector. The rescue came with conditions including creation of a bad bank, Sareb, to absorb toxic assets. Sareb held approximately 100 billion in assets. The case illustrated how real estate bubbles can devastate banking systems.