Spanish banks were rudely awoken from their summer siesta by news that the much anticipated merger process among the country's 45 cajas, or regional savings and loans mutuals, was suddenly gathering momentum. Consolidation in this highly fragmented sector was not unexpected.
With the rise in non-performing mortgages, the sector's bread-and-butter business, and spiralling corporate failures, a system of fewer and stronger cajas has long been viewed as essential to the health of Spain's financial services industry. The Bank of Spain's restructuring fund, approved in June with an initial €9bn war chest, is also designed to support the restructuring of the cajas. The fund was set up to inject fresh equity into newly merged entities, as well as those deemed able to soldier on alone through the recession.
