Spanish banking system to undergo reforms

11 May 2012

Spain's banking industry will today (11 May) undergo extensive reforms as part of the government's plan to improve conditions in the sector.

Following a cabinet meeting scheduled for this morning, it is thought officials in Madrid will announce that financiers are now legally required to set aside extra money so they can cover the cost of bad loans in the future.

The amount of additional funds financiers will need to keep in reserve for this reason is expected to be around €30 billion ($39 billion), as policymakers in the administration look to make sure there is no repeat of the nation's monetary crisis.

Robert Peston, business editor at the BBC, commented: "The big question is whether the Spanish state can afford on its own to put into these banks the sort of capital that is necessary or whether they will have to go for emergency help."

Earlier this week (10 May), the government revealed it has taken on a 45 per cent stake in Bankia, the lender struggling due to its exposure to the country's ailing property sector.

By Asim Shah

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