IMF says Spanish banks need nearly $50 billion

AP Graphics

Updated 11:19 PM ET

(AP) WASHINGTON - The International Monetary Fund is estimating that Spanish banks need at least a euro40 billion ($49.87 billion) capital injection following a stress test it performed on the country's financial sector.

The lending institution said Friday that Spain's financial sector is well managed but vulnerable. It recommended that banks raise capital by an additional unspecified amount beyond the euro40 billion to properly restructure troubled banks, noting that the country should be prepared for further bank losses.

"Going forward, it will be critical to communicate clearly the strategy for providing a credible backstop for capital shortfalls — a backstop that experience shows it is better to overestimate than underestimate," said Ceyla Pazarbasioglu, an IMF deputy director who head of the team that conducted the report

Will Spain seek an international bailout?

The IMF report said that most large banks in Spain are resilient but are being undermined by the vulnerabilities of weaker banks. It praised Spain for steps it had already taken to shore up its financial sector.

"Executive directors commended the Spanish authorities for the significant progress made in consolidating the banking sector and addressing balance sheet weaknesses amidst challenging economic conditions," the IMF said.

The Spanish government appears resigned to the need for a bailout from Europe.

Spanish Deputy Prime Minister Soraya Saenz de Santamaria said Friday that the country could decide this month whether to request a bailout. She said the government will not act until receiving evaluations from the IMF and two independent auditors Spain has hired. The auditors' surveys are due by June 21.

Saenz de Santamaria declined to say how much the sector, hit by the collapse of the country's real estate bubble, might need. Commenting on reports that 17 eurozone finance ministers will hold a conference call the Saturday on Spain, she said that "no meeting is planned" but would not confirm or deny whether some kind of communication would take place.

Spain has been criticized as being too slow to set out a road map to resolve its problem. European business leaders and analysts have stressed that Spain must find a solution quickly so that it is not caught up in any market turmoil sparked by the Greek elections on June 17.

[fiddlestickawshucks]

$50 BILLION.??

No wonder countries are in so much financial trouble.

This figure just goes to show you how smar the IMF is NOT.!!

In just two days the amount Spain needs has jumped to between $125 to $150 BILLION dollars.

Underestimating the amounts of money countries need to survive seems to be a disease among entities like the IMF, the Federal Reserve and Congress.

European countries leaders are now digging the same deep holes for their countries as the "leaders"of the US.

GB2, Congress and Obama are responsible for our current crisis, along with Wall Street, corrupt banks, bought and paid for Congressmen, big business, mortgage lenders etc..

It will be interesting to see if European countries "reward" their failed banks,etc. for their misdeeds.

[formerlyluvnut]

Only $50 Billion? We'll give it to 'em.

[sdemaggie]

Couple of quick questions:

Where does number come from? What is the expected impact of run on Spanish banks? Are reserve funds available at sufficent level?

What is the Spanish governement doing regarding bankruptcy reform? This is a MAJOR issue. The bad loans MUST be discharged from the banks, individuals and businesses. These zombie loans must be expunged in an orderly fashion.