In Spain the banks and national government are at odds about potential merger activity. The government is in the process of implementing financial sector reforms that aim to strengthen provisions covering toxic real estate assets. During the reforms, banks will not be forced to merge with each other even though the Ministry of the Economy would like that to happen. Neither banks nor savings banks have any intention, for now, of merging, because all banks have stated that they are capable of meeting current capital requirements using their own resources.
Of course, normal contacts will continue on a daily basis within the sector. Only the strongest banks are asking for state funding in order to take over the weakest banks. At first this aid will be doled out piecemeal, because Spain is dealing with excessive national debt, and the money that is destined to clean up the financial sector has been reserved for selling nationalized savings banks: Unnim, CatalunyaCaixa, Novagalicia y Banco de Valencia.
In the last several weeks, expectations of a new wave of major mergers have waned and most banks in the financial sector now indicate that deals will be cut to the bare minimum. One manager dared to say that only the nationalized banks would merge. Minister Luis de Guindos has wanted to cut the number of Spanish banks to twelve, but the goal to consolidate the sector is now a chimera.
The financial reform is creating some opportunities, but whatever incentives exists are not speeding up business in the sector, and projects getting under way starting tomorrow will be based on exhausting all the alternatives for obtaining resources to come up with provisions totaling 50 billion euros this year alone before setting off on a venture with a partner.
Several sources from within the sector have pointed out that the financial reform still allows the Spanish government to grant aid even if no banks decide to merge. "This route would be approved by banks that cannot meet all their obligations in September," they said. That is to say, the plans that they will present in March will not involve any mergers if the government cannot provide aid with convertible bonds instead of ordinary shares.