Four Spanish regional savings
with total assets of more than EUR135bn ($166bn),
have preliminarily agreed to merge to
create the fifth largest banking group in the country amid growing
pressure to strengthen the beleaguered financial sector.

The agreement
Caja de Ahorros de Mediterráneo, Cajastur, Caja de
Extremadura and Caja Cantabria and comes after the Bank of Spain
took control of CajaSur savings bank as its agreement with Unicaja
fell through (see Spain siezes control
of CajaSur

The banks said the aim of the merger is to
“become one of the leading groups in the Spanish financial system
and strengthen the solvency of the participating

Although the banks said they would remain
separate entities with retail business and governing bodies
remaining independent, certain operations would be merged such as
credit evaluation, internal controls and regulatory

A memorandum of understanding submitted to the
central bank is subject to approval by the boards of the respective

The country’s regional savings banks are seen
as financially vulnerable because they are the most exposed to the
nation’s property market slump. The government has given the banks
a 30 June deadline to merge and consolidate.