The Bank of Spain intervened yesterday the Mediterranean Savings Bank, also known as CAM. Something that should have happened much earlier, if we keep in mind that the bank asked for this to occur. The situation has reached this point because both the Government and the supervisor preferred to sell a fake image about their financial reform and changes in the Savings Banks System, but ultimately, the truth came trough.
CAM is one of the five Spanish institutions that failed the latest stress tests in the EU. During 2010 and 2011, CAM has experienced a huge bleeding in its deposits that weakened its situation. It has also suffered from too much reliance on short-term funding, the ECB and the interbank market. Also, it did not find a dance partner for a possible merger.
The words last week of Bank of Spain´s governor, Fernández Ordóñez, sound phony, since he claimed that no financial institution would need additional capital. Yesterday, the governments fund to help the financial system, also known as FROB, injected 2,8 billion euros and approved a 3 billion euros line of credit. Ordonez´s credibility is once again on the edge. His lack of action has provoked that the CAM had to ask for its own intervention.
Luckily this failure did not happen a few days ago, when Spanish premium risk hit new highs. The side effects could have been devastating thanks to the negligence of the supervisor and the government.
