Spain's economy minister says it will require all of its banks to increase their core capital ratio to 8% to give them a bigger cushion against economic difficulties and boost confidence in the nation's financial system.
'This ratio can be higher for lenders that are not listed or that do not have a significant presence of private investors and depend on the wholesale market for more than 20% of their assets,' minister Elena Salgado said.
Markets have been eagerly waiting to see how Madrid would tackle its banks in the face of a widespread euro zone debt crisis which has already seen Greece and Ireland need bail-outs, with Portugal and Spain mentioned as possibly next on the list.
By requiring the banks to keep a high level of capital immediately available, the government is hoping that they will be able to cope with any new emergency and so not require hugely costly government help.
Spain's regional savings banks are weighed down by loans that turned sour after the collapse of a housing bubble and are at the heart of fears that Spain could run into trouble and need a much bigger rescue than those granted by the EU and IMF to Ireland and Greece last year.
While major Spanish banks like Santander or BBVA can comfortably cope with their bad real estate loans, there are fears that some of the regional savings banks may not be able to do so.
All eight major Spanish banks passed EU bank stress tests conducted in July on their ability to weather a fresh crisis but five out of 19 regional lenders examined failed. Salgado said increasing the core capital ratio would ensure that all Spanish lenders would pass a new round of European bank stress tests that will be held later this year.
