Spain formally requests banking aid

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MADRID, Spain – Spain formally requested a rescue loan of up to 100 billion euros ($125 billion) from its eurozone partners in a letter released Monday.

No new figures were included in the letter, after reports by independent consultants last week said stricken Spanish banks could need up to 62 billion euros to survive a severe, three-year financial slump.

Spain’s government viewed the loan offer from its partners “very favourably,” Economy Minister Luis de Guindos said in a letter addressed to Eurogroup head Jean-Claude Juncker.

De Guindos said Spain’s authorities would offer “all their help” in deciding the loan’s eligibility criteria, conditions, required measures and contract definition.

The aim was to finalize a memorandum of understanding in time for it to be discussed at a July 9 meeting of the Eurogroup, which groups the 17 eurozone finance and economy ministers.

Spain’s economy minister confirmed in the letter that the money would be funnelled to needy banks through the state-backed Fund for Orderly Bank Restructuring (FROB).

De Guindos said the ministers should use as a “starting point” an IMF report on Spain’s banks, alongside the findings of international consultants Roland Berger of Germany and Oliver Wyman of the United States.

Their audits tested 14 top banking groups in a likely “baseline” scenario and a “stressed” outcome of a slumping economy and real estate sector.

They found that in a stressed scenario lasting three years, the banks would need 51-62 billion euros in extra capital.

In a baseline case they would need just 16-26 billion euros.