March 30, 2009

The Bank of Spain took over a troubled savings bank on Sunday, saying the bank has more than a 2 billion euro ($2.65 billion) shortfall that the government will guarantee, according to a government statement and CNN affiliate Cuatro TV.The takeover on Sunday is the first since the financial crisis hit Spain. Its Socialist government has previously lauded its banking sector for weathering the storm due to strict regulations and extra-cash provisioning measures.The chief executive officer and the entire board of the savings bank, Caja de Ahorros de Castilla-La Mancha, were relieved of duty and replaced on Sunday with three administrators appointed by the Bank of Spain, according to the statement and Cuatro TV.

The savings bank, which operates in the sprawling Castilla-La Mancha region just south of Madrid, has assets of about 17.2 billion euros ($22.8 billion), but liabilities of about 19.5 billion euros ($25.8 billion), Cuatro reported.Second Deputy Prime Minister and Finance Minister Pedro Solbes told reporters he expected to use two to three billion euros for the ailing bank, Cuatro reported.But the prime minister's cabinet, which held an extraordinary Sunday meeting, approved a nine billion euro maximum credit for the entity if needed, the government statement said.The emergency measures emerged during the weekend after the bank's efforts to merge with a larger savings bank in the Andalusia region fell through.