SOURCE: Paragon Financial Limited

Paragon Financial Limited

July 16, 2012 08:20 ET

Euro Zone Provides Support to Faltering Spanish Banks

The Paragon Report Provides Stock Research on Banco Santander and Banco Bilbao Vizcaya Argentaria

NEW YORK, NY--(Marketwire - Jul 16, 2012) - This has proven to be a tough year for Spanish banks. Banco Santander S.A. and Banco Bilbao Vizcaya Argentaria S.A have both fallen over 20 percent year-to-date, and were downgraded two notches by Fitch Ratings. Recent reports showed that Spanish banks' borrowing from the European Central Bank (ECB) rose to a record in June. The Paragon Report examines investing opportunities in the Foreign Banking Industry and provides equity research on Banco Santander, S.A. (NYSE: SAN) and Banco Bilbao Vizcaya Argentaria SA (NYSE: BBVA).

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Data released by the Bank of Spain on Friday showed that net borrowings in June surged 17 percent to EUR 337.21 billion from EUR 287.81 billion in May. In the last year borrowing from the ECB has soared sevenfold from the EUR 47.78 billion in June 2011. A faltering confidence in Spain's banking system has seen deposits dwindle, and Spanish banks have relied on ECB loans to help offset the loss.

Borrowing from the ECB "was expected to go up, but maybe not this much," said Juan Pablo Lopez, an analyst with Espirito Santo Investment Bank in Madrid. "It's a sign of weakness in the system."

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According to a recent article by AP the first bailout payment of EUR 30 billion ($36 billion) would come from the temporary European Financial Stability Facility (EFSF). EUR 20 billion ($24 billion) would be used to help support short term finances, while the remaining EUR 10 billion ($12 billion) would be for a long-term security buffer.

There would be three additional payments of EUR 15 billion ($18 billion) made in November, December, and next June. AP also reported the euro zone would make available EUR 25 billion ($30 billion) to create a "bad bank," which would buy distressed debt from the "good" banks' balance sheets.

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