In Socialist Spain, CajaSur is Seized, Nationalized

In the meantime, the IMF is urging Spain to do more to slow down the crisis.  Dominic Strauss Kahn says Spain has an irregular job market, a housing bubble that is about to explode, a huge fiscal deficit, a weak banking system which is not competitive and a growing debt with foreigners.  Although Strauss Kahn called Zapatero’s efforts important, he also said such changes are not enough.

Market Watch

Based in the southern city of Cordoba, CajaSur has $16.36 billion of loans outstanding and holds $23.9 billion, or 0.6%, of the assets within Spain’s financial system, the reports say.

CajaSur on Friday determined not to go ahead with a plan reached in August to merge with a bigger lender, Unicaja of Malaga. The failure of that plan prompted the authorities to take over CajaSur, reports say.

For 2009, CajaSur posted a net loss of 596 million euros ($750 million). Bank of Spain officials estimate that restoring the bank to solvency will require about 500 million euros of fresh capital, reports say.

CajaSur, which had been controlled by the Roman Catholic Church, was the second Spanish bank failure in a bit more than a year, reports say. In March 2009, the Spanish central bank seized control of Caja Castilla-La Mancha.

The seizure of CajaSur comes against the background of international concern about Spain’s creditworthiness. This month, the European Union put in place a financial backstop against the prospect that Spain and other countries could default on their debt.