Banco Santander collapse

[Terry Mauro]

LED BY BANCO SANTANDER, SPAIN'S BANKS CONTINUE TO IMPLODE

June 2, 2010 (EIRNS)--The Inter-Alpha Group's Banco Santander

continues to lead the implosion of the Spanish banking sector.

The Madrid Stock Exchange collapsed for the third straight day

with Banco Santander and Banco Bilbao Vizcaya Argentaria (BBVA)

leading the way, with a decline of 2% in a third straight day of

losses. Santander and BBVA have both now lost over 25% of their

market capitalization in the last seven weeks.

A very senior Brazilian banking source in Europe told EIR

today that it is well known in Brazil that Santander has been

sitting on a pile of junk, and has only been saved because of its

holdings in Brazilian state debt. When questioned on the

appropriateness of the high interest rates Brazil offers and the

costs of the carry trade, he indicated that he himself was not

pleased with it. Furthermore, he said, there is a debate in

Brazilian policy circles exactly on this question.

Meanwhile, the {Financial Times} reports that Spain's cajas,

or savings banks, are in a race against time to create mergers

among themselves which is expected to reduce the number of cajas

from 45 to 20. Most are on life support from the European Central

Bank, whose repo operations are their only access to credit. The

cajas hold the lion's share of the nearly EU500 billion in

mortgages -- most of which have gone bad. The cajas have to merge

by June 30th in order to qualify for funds from the government's

Fund for Orderly Bank Restructuring (FROBS). The mergers will

lead to extensive lay-offs.