The Bailout

On Friday, the BBC's news website published a short piece on the Spanish bank bailout fund - the FROB. For those who take an interest in this kind of thing, the piece is a touch inadequate.

1). The 9 billion euros of bailout money referred to is the initial funding for the program. In extremis, this amount could be levered to 90 billion.

2). The FROB will, in fact, begin with 36 billion to be dedicated primarily to the salvation of various cajas de ahorros. This figure is what the BBC should have reported.

The money will be dished out as a purchase of non-voting participaciones preferentes on the part of the Banco de España, with the condition that they be redeemed by the issuer within seven years. That not being achieved, they convert to voting shares - a circumstance never before faced by the non-profit, non-public and highly region-affiliated cajas.

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