Spain's parliament approved Wednesday a reform of the law governing the nation's troubled regional savings banks that reduces the influence of regional politicians on their management and makes it easier for them to raise capital.
Finance Minister Elena Salgado called the reform "the most important carried out in this sector since the 19th century" and said it would strengthen and boost confidence in the country's financial system.
The new law limits the voting rights that regional administrations and public entities can exercise in the lenders? management bodies to 40 percent from 50 percent previously.
Elected politicians will no longer be able to serve in the lenders? management although regional parliaments will select officials to represent them in the savings banks.
It also allows the regional savings banks to raise fresh capital by selling shares known as "cuotas participativas" that carry voting rights, a step which Salgado said will make the banks "more attractive" to investors.
The law was approved with the backing of the ruling socialists and the main opposition Popular Party while smaller, mostly regional parties either voted against the reform or abstained.
Its passage comes ahead of the publication on Friday of the results of stress tests on 91 banks from across Europe which measure how they would perform if the economy worsens.
Spanish banks got off relatively lightly in the global credit crunch in 2008 as the country's strict rules meant they did not invest heavily in the high-risk US home loans that hurt financial institutions elsewhere.
But many regional savings banks have been heavily exposed to bad debt since the collapse of the property sector at the end of 2008.
The regional savings banks, many of which are owned by regional politicians, account for about half of all lending in Spain.
The central bank and the government have called for the consolidation of the sector in order to maintain liquidity.
Last month the central bank said the restructuring process underway involves 39 of the nation's 45 regional savings banks in 12 separate processes.
The reform law was based on recommendations from the Bank of Spain and the Spanish Confederation of Savings Banks.
Source: AFP Global Edition