The Banco de España has today informed credit institutions of its calculations of the additional capital they will need, in compliance with the provisions of Royal Decree-Law 2/2011 of 18 February 2011 for the reinforcement of the Spanish financial system.

The above-mentioned Royal Decree-Law establishes a general minimum ratio for core capital, as defined in its Article 2, of 8% for consolidateable groups of credit institutions and individual credit institutions that do not belong to a consolidateable group that are able to raise repayable funds from the public. This ratio rises to 10% for those groups or institutions that have not placed securities representing at least 20% of their share capital or voting rights with third parties, and that have wholesale funding of more than 20%, according to the definition in the Circular of the Banco de España No 2/2011. The objective of the reform approved today by Parliament is to reinforce the solvency of the financial system even further, in order to dispel any uncertainty and restore market confidence.

Those institutions that have to increase their core capital have fifteen business days to present to the Banco de España their strategy and timetable for compliance with the new capitalisation requirements. Such strategy must state the concrete measures the institutions plan to implement in order to comply with these requirements before 30 September 2011. The Banco de España will have another fifteen business days to approve these documents or, where applicable, require relevant modifications.

The overall amount of €15.15 billion is subject to possible changes. First, some banks have already announced that they envisage, as a first option, raising funds from investors amounting to at least 20% of their capital.

Insofar as they manage to do this and consequently comply with the condition in the Royal Decree-Law on market access, the 8% core capital ratio will apply to them and, therefore, the total amount of additional capital needed will change.

In addition, banks may also adjust their capital ratios by means of extraordinary operations, such as those indicated in Article 1 of Transitional Provision One of the Royal Decree-Law (sales of branches, strategic holdings or asset portfolios), which would reduce the need to obtain new capital.

Press release