Spain's banking sector has been hit by the decline in Spanish property prices. Shares in Spanish banks fell following the government bail-out of one lender over the weekend. On Saturday Spanish bank Cajasur - one of Spain's largest regional lenders - was taken over by Spanish authorities after running into trouble.
These Caja banks are heavily exposed to the collapse in Spain’s property market. The Spanish government are trying to get them to merge to become stronger. The action was taken after a planned merger between Cajasur and savings bank Unicaja fell though at the end of last week.
Cajasur becomes the latest victim of Spain's property market collapse, which has left the Caja (Savings Banks) banks saddled with debts worth 445bn euros.
Shares in Santander were down 1.25%, while lenders BBVA and Banco Popular were also down 2% and 1.3% respectively. The move also affected the currency markets, with the euro down against both the pound and the euro.
The single currency was down 0.6 cents against the dollar at $1.2512, and was down 0.8 cents against the pound, with a pound buying 1.16040 euros.
Analysts said the bail-out would raise fresh concerns among investors about the stability of the Spanish banking sector, and the ability of the Spanish government to repay its debts.
Last week Spain approved plans for a 15bn euro package of austerity measures designed to reduce its debts.
Just another crack in the dam!
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