• Spain's news in English

Madrid makes banks chip in for preference compo

AFP · 22 Mar 2013, 17:54

Published: 22 Mar 2013 17:54 GMT+01:00

Facebook Twitter Google+ reddit

Private banks will be asked to make an "extraordinary contribution" to the state Deposit Guarantee Fund of €3 for every €1,000 they hold in deposits, said Finance Minister Luis de Guindos on Friday.

That will provide the fund with €1.5 to 2.0 billion ($1.9-2.6 billion) which will then be used to compensate small investors who bought complex and risky "preference shares" sold by now nationalized lenders such as NovaCaixaGalicia and CatalunyaCaixa, he added.

After Spain's decade-long property bubble burst in 2008 sending the economy into a tailspin, savings banks stepped up their marketing of preference shares as they tried to boost their solvency ratios to meet stricter regulatory demands.

But as Spain's economic downturn deepened the value of the preferred shares plunged and it made it effectively impossible to resell them, causing thousands of small investors to lose their savings.

Many small investors say their banks had assured them that the higher-yielding preferred shares were as safe a savings deposit and they have held noisy protests outside of their bank branches to demand their money back.

"This is a real problem because €8 billion worth of these types of products were sold and it affects some 300,000 people," de Guindos said, adding 75 percent of the preferred shares were sold in 2008 and 2009.

"There are preferred shares all over the world but they are sold to specialized investors. In Spain they were sold especially to private investors."

Under the government plan holders of preferred shares will receive regular bank shares in exchange. The Guarantee Deposit Fund will then buy out the shareholders of the now nationalized banks since they do not have traded shares.

Story continues below…

Spanish banks' balance sheets were strewn with red ink after a 2008 property crash, forcing Spain to prop them up with €42 billion in rescue loans offered last year by its eurozone partners.

As one of the conditions of extending the rescue funds, Brussels demanded that holders of preference stock share in their banks' losses.

Facebook Twitter Google+ reddit

Your comments about this article

Today's headlines
Spain's Podemos sees golden opportunity in Socialist woes
Pablo Iglesias is ready to step up in opposition. Photo: AFP

As Spain's conservatives prepare to re-take power after 10 months of political limbo, anti-austerity party Podemos has set its sights on replacing the divided Socialists as the main opposition force.

Wildlife ranger accused over decapitated bison in Valencia
The headless corpse of Sauro was found last month. Photo: Carlos Alamo / Reserva de Valdeserrillas

The case of the beheaded bison at a wildlife reserve in Valencia just got a whole lot weirder.

Spain jobless drops below 20% for first time in six years
The unemployed queuing up outside a Madrid job centre. Photo: AFP

Spain's unemployment fell below 20 percent for the first time in six years, official figures showed on Thursday.

'Saints not ghouls' insists Spanish church for Halloween
Suggested outfits from the Bishopric of Cadiz and Ceuta. Photo: Shower of Roses

Spanish bishops are urging good Christian children to forgo zombie, ghost and devil outfits and instead dress up as "saints, virgins and apostles".

Tough road ahead, Spain PM warns before return to power
Rajoy will try and form a government this week. Photo: AFP

Spain's acting Prime Minister Mariano Rajoy warned on Wednesday of a tough road ahead as he prepares to take power again at the head of a minority government with little support.

Russia withdraws request to refuel warships in Ceuta
The aircraft carrier Admiral Kuznetsov was due to dock in Ceuta

Russia has withdrawn a request for its aircraft carrier group to be refuelled at the Spanish port of Ceuta, authorities confirmed.

Bulls replace guard dogs at scrap yard in Valencia
Two bulls will be patrolling the scrap yard in eastern Spain. Archive photo: AFP

Guard dogs were not proving enough of a deterrent to thieves at a car breakers yard in eastern Spain so the owner has brought in a pair of fighting bulls.

Two-headed shark born in Spanish laboratory
Scientists are studying the rare find. Photo: IBIMA / University of Malaga

Scientists at the University of Malaga found the embryo of a shark with two heads and just one body.

Spain under pressure to stop refuel of Russian warships
Russian aircraft carrier Admiral Kuznetsov is due to arrive in Ceuta. Photo: Mil Ru / Wikimedia

Spain is facing international pressure to refuse permission for a Russian warship flotilla to refuel in Ceuta en route to continuing airstrikes against the Syrian city of Aleppo.

Most wanted: Fugitive rapist arrested in Tenerife
Mohammed Jahangir Alam was arrested n Tenerife. Photo: Crimestoppers.

Mohammed Jahangir Alam, one of Britain's most wanted fugitives, who fled the country in 2008 after allegedly raping a woman, was found working in Tenerife.

Analysis & Opinion
Out of the dark: Five years on from Eta ceasefire
Sponsored Article
Last chance to vote absentee in the US elections
Spanish 'La Mafia' restaurants banned after Italian complaint
Spain's top court overturns bullfighting ban in Catalonia
Hunt launched for ten most wanted Brit fugitives hiding out in Spain
Napflix: Spaniards launch very boring TV channel for siestas
Madrid parish church faces fine over 'too noisy' bells
Celebrate expat life at Madrid’s THRIVE convention
Fury after kids told to bring their own loo roll to school
Disney announces plans for Don Quixote action movie
Activist tells 8-yr-old matador wannabe with cancer 'just die'
King to make last minute push to avoid third vote in Spain
Amazing photos of Catalonia's 'human tower' contest
What's on in Spain: October 2016
'No way, Jose! You'll never get your hands on our Rock'
Recipe: How to make a classic Spanish tortilla de patatas
Chorizo in paella? Go back to cooking school Jamie Oliver
Spain in eye of a perfect storm after 10 months without govt
Thousands share clips of life for 'Spain in a Day' film
Ten incredible Spain locations for Game of Thrones season 7
Analysis & Opinion
Why moving to Spain could be the best decision of your life
Seven reasons why autumn is the very best season in Spain
Spanish study finds four types of personality. Which are you?
New search underway for civil war grave of poet Lorca
jobs available