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Demetrio Fernández is not a name that comes up often in international financial circles. But the bishop of Cordoba made headlines in the business press on May 22nd when CajaSur, a church-owned regional savings bank, or caja de ahorros, was seized by the Bank of Spain due to “viability problems”.
The CajaSur rescue, although affecting only 0.6% of the total assets of the Spanish banking system, rattled already jittery markets. With heavy exposure to Spain’s battered property market and limited recourse to external funds, the cajas represent worrying “pockets of weakness” in the Spanish financial system, according to the IMF.
Given Spain’s dire fiscal state, it needs the explicit threat of seizure of uncooperative lenders to speed the long-delayed restructuring of the beleaguered cajas. However, the risk remains that the savings banks lack the collective will to fix themselves.
Read more at Financial Services Briefing: “A dangerous precedent” (May 26th)