Document Type

Case Study

Case Series

Broad-based Capital Injections

JEL Codes

G01, G28


The Spanish government created the Fondo de Reestructuración Ordenada Bancaria (FROB), known in English as the Fund for Orderly Bank Restructuring (FROB) in 2009 to perform temporary capital injections that facilitated the restructuring and mergers and acquisitions of struggling institutions. The FROB used preferred shares, ordinary shares, and contingent convertible bonds to recapitalize struggling Spanish credit institutions. The FROB injected a total of €54.4 billion of capital in three rounds. FROB I in 2010 injected capital to support the mergers of 25 insolvent regional savings banks, or cajas, into seven larger, more solvent banks through the subscription of convertible preferred shares. FROB II in 2011–12 recapitalized struggling banks, including three of those seven merged banks, using ordinary shares. FROB III in 2012–13 recapitalized banks that had failed a stress test by subscribing shares and purchasing contingent convertible bonds. In 2012, the government gave FROB resolution powers and created an asset management company, Sareb, of which FROB owns 45%. As of December 2018, the FROB still was holding shares of a number of institutions. The FROB’s timely capital injections helped capitalize Spanish banks and prevent a systemically damaging insolvency, but it had incurred losses as of the end of 2018.

Date Revised