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Document Type

Case Study

Case Series

Ad hoc Emergency Liquidity Programs

Abstract

Following years of rapid credit expansion in the real estate sector and reliance on wholesale funding between 2000 and 2008, Caja de Ahorros de Castilla–La Mancha (CCM) found itself on the brink of insolvency in early 2009. Normally, a Eurosystem bank in CCM’s position would turn to the European Central Bank (ECB) to obtain liquidity through its standing financing facilities, but CCM lacked eligible collateral to tap them. Consequently, in February 2009, the Bank of Spain (BoS) provided emergency liquidity assistance (ELA) of EUR 900 million to CCM, secured against CCM assets, to help meet its liquidity needs. In March, a merger with another savings bank fell through and the BoS put CCM in administration, replacing its board. On March 31, the BoS provided a new ELA line of up to EUR 9 billion, replacing the February ELA. The second ELA came with a state guarantee of up to EUR 3 billion. Its purpose was to support CCM’s financial health and prevent a large future expense to taxpayers. The second ELA from the BoS and the state guarantee remained in place for 15 months, until June 2010, when the restructuring plan for CCM was approved and CCM’s acquirer repaid the BoS for the ELA. Ultimately, Spanish authorities restructured CCM, and the banking business was taken over by Banco Liberta; some of the remaining assets were taken over by the Savings Bank Deposit Guarantee Fund as payment for the capital injection it administered. CCM was borrowing EUR 1.2 billion under the ELA at the end of 2009 and still had that amount outstanding at the time of its expiration at the end of June 2010, when the restructuring was approved.

Date Revised

2025-04-15

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