The Spanish central bank took over Caja Castilla la Mancha on Sunday and agreed to provide funds backed by up to 9 billion euros in government guarantees, the first such move in 16 years.
The government decided to rescue Caja Castilla La Mancha after its negotiations with another larger rival bank failed. CCM represents less than 1% of the assets of the Spanish banking system.
The move by Spanish authorities to take over the CCM bank has sent shivers through the Spanish banking sector, previously considered to be weathering the financial storm well.
Monday morning saw shares on Spain’s stock exchange drop as the takeover hit headlines around the globe. Stocks in Banco Santander SA (STD) fell 5.6% to EUR5.04 at 0854 GMT, while rival BBVA (BBV) was down 4.9% to EUR6.02, and Banco Popular SA (POP.MC) fell 5.5% to EUR4.68, pressuring the IBEX-35, which declined 3.3%.