7:32PM BST 18 May 2012
The high street bank also saw an increase in enquiries by worried savers to its call centres and in its 1,380 branches across Britain yesterday. Customers are worried that the bank will be dragged into the eurozone crisis because it is owned by Spain’s Banco Santander.
On Thursday, Banco Santander, its UK subsidiary and 15 other Spanish banks had their credit ratings downgraded due to their exposure to the struggling Spanish economy. The Spanish banks were hit with more bad news yesterday, as official figures showed bad debts had risen to their highest level in 18 years.
However, shares across the sector shrugged off the concerns to rally strongly, as treasury minister Inigo Fernandez de Mesa said there was little reason for concern as “Spanish banks have plenty of liquidity”. Lenders have about two years of funding, due to the European Central Bank’s emergency support.
Spain is expected to announce shortly that the fund manager BlackRock and consultants Oliver Wyman will conduct an independent audit of the banks as part of month-long stress tests. Their remit will be to assess how much of the €600bn (£483bn) of mortgage debt needs to be written down.
The government will make public the findings of the two-stage audit in an attempt to end speculation about concealed risk. Goldman Sachs has been drafted in separately to assess how much capital Bankia needs, with analysts suggesting the taxpayer could be on the hook for between €12bn and €15bn of new equity.
Nicholas Spiro, managing director of Spiro Sovereign Strategy, said: “The decision to proceed with an external audit of banks’ loan books ... does lend much-needed credibility to the clean-up, it should help draw a line under the losses.”
However, he warned that the taxpayer could be left with a €50bn recapitalisation bill and that any further economic deterioration could see the figure mushroom. The share price rally came despite official figures from Bank of Spain that showed bad debts had risen in March to €148bn, or 8.37pc of all outstanding loans – up from 8.3pc in February and the highest since August 1994.
In the UK, Santander said it had seen a “small increase” in withdrawals yesterday by some of its 25m customers with savings above £85,000. UK deposits are guaranteed up to that level.
Councils such as Kent, Havering and Westminster have all temporarily removed short-term deposits until the pressure on the Spanish banking system has eased.
Santander UK is an independent subsidiary and regulated by the Financial Service Authority. As a result, the Spanish parent cannot access the UK bank’s capital or deposits without UK regulatory approval.