The FROB intervened in several Spanish savings banks in 2011: Banco de Valencia, CatalunyaCaixa, Novagalicia, CAM and Unimm. During the intervention, these firms registered pretax losses of 7.142 billion euros. After taxes this amount dropped to 5 billion euros. If Bankia's 3 billion euros in losses are factored in, the banks' net losses exceed 10 billion euros, figures which underscore the precarious situation that these banks are experiencing. Several of them could close as the financial sector bailout gets underway.
The EU wants to carry out a controlled demolition of the zombie banks, which are the entities that were created by merging relatively healthy banks with banks that had serious problems and ended up weighing down the healthier partner bank. And the EU is also thinking about liquidating them. The EU's Joaquín Alumnia is right in recommending selling a Spanish bank if the costs of rebuilding it are too high for taxpayers. For this reason, the conditions placed on banks are going to be very strict.
Banks with resources greater than 150 billion euros will be exempt from sell-offs, but they will be expected to abide by the same conditions as smaller struggling banks. The European Commission knows that the crisis is close to undermining Europe's strongest economies. For example, investors generally flock to the very safe German bund, but its interest rates have been driven up recently. In times of little faith, strong protective measures are necessary.
