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Tue 1 Mar 2011 04:19 PM

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UAE to invest €150m in Spanish savings bank

After Qatar, UAE becomes the second Middle Eastern country to back Spain's regional banks

UAE to invest €150m in Spanish savings bank
SPANISH INVESTMENT: The UAE will invest €150m ($207m) in a Spanish savings bank (Getty Images)

The UAE will invest €150m ($207m) in a Spanish savings bank, a Spanish government spokesman said on Tuesday, the second Middle Eastern country to back Spain's regional banks.

The government official did not name the bank. The Spanish savings bank association, CECA, declined to comment.

Qatar said on Monday it would invest €300m in Spanish banks, during the visit of Spanish Prime Minister Jose Luis Rodriguez Zapatero to the Gulf state. Zapatero is visiting Tunisia, Qatar and the UAE as part of a Middle East tour.

The Spanish government is trying to attract private capital for its regional banks to plug a funding gap that the government has estimated at €20bn, caused by over-zealous lending during a property boom which turned to bust.

Credit rating agency Moody's on Monday raised its estimate for the funding shortfall to €50bn from an earlier estimate of €17bn, and said losses would be mostly concentrated in the savings banks.

The oil-exporting countries are the first private investors to promise money to the savings banks, known as 'cajas', since venture capitalist JC Flowers got cold feet over an investment in merged caja group Banca Civica last year.

Sovereign wealth funds from oil-rich Gulf states have pumped billions of dollars into banks worldwide as they seek returns on profits from their oil industries.

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