Ministry of Economy and Competitiveness – Government of Spain

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June 11, 2012

Treasury Statement on financial assistance to recapitalise the spanish banking sector

On Saturday, June 9th 2012, the Spanish Government has announced its intention
to request European financing for the recapitalisation of its weakest financial
institutions.
The Eurogroup has stated its willingness to respond favourably to such a request
with a loan sufficient to cover estimated capital requirements with a significant
safety margin, summing up to 100 billion Euros that will be provided by EFSF/ESM.
In line with the conclusions of its recently published Financial System Stability
Assessment on Spain, the IMF welcomes the commitment of Europe and Spain and
stands ready to support the implementation and monitoring of this financial
assistance.
The European funds will be provided to the State Fund for Orderly Bank
Restructuring (FROB) under more favourable conditions than currently offered in
the capital markets. The FROB will then use those funds to recapitalise Spanish
financial institutions in accordance with EU State Aid Rules. The Kingdom of Spain
will retain the full responsibility for the financial assistance thus provided.
This financial assistance will not only not undermine the present conditions of the
current stock of Spanish Public Debt: it will also reinforce its overall solvency.
Furthermore, a sound and duly capitalized banking system will reduce future
contingent liabilities of the State and will therefore reinforce the sustainability of
Spanish debt.
The upper limit of 100 billion Euros guarantees a credible backstop, sufficient to
cover the system’s eventual capital needs in the most stressed hypothetical
scenarios, plus an additional buffer.
This agreement will only entail the necessary policy conditionality pertaining to the
financial sector, and does not require any additional commitments on fiscal
consolidation and structural reforms than those already in place.
The details on this financial assistance package will be established in coordination
with our European partners and duly communicated to the market.
In this context, the Spanish Treasury reaffirms its commitment to capital
markets, and will therefore continue to execute its funding programme
through its regular auction calendar.
The Spanish Government remains committed to the programme of fiscal
consolidation and structural reforms that has earned Spain the confidence
of its European partners.

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