MADRID, Feb. 11 (UPI) -- The Spanish government said Friday most of the country's savings banks must raise more capital to avoid a mandated bailout and state takeover.
The British newspaper The Daily Telegraph reported 12 of Spain's 17 savings banks or "cajas" must raise their capital reserves to guard against a possible economic downturn.
The mandate comes after Portuguese bond yields reached 7.66 percent this week, increasing concerns Portugal and possibly Spain would have to reach out for international aid.
Greece and Ireland have already turned to the international community in Europe for assistance. In Spain, economic secretary Jose Manuel Campa said: "It will be a challenge. (Cajas) have not taken part in the equity markets for some time."
Campa said the banks collectively need $27 billion to avoid a mandated government bailout.
Other analysts have predicted the banks need two and three times that amount, something Campa rejected.
"These high numbers are based on very stretched scenarios, with a fall in house prices by 50 percent and land prices by 70 percent," he said.
Campa also said the credibility of the European Union's bank stress tests was compromised when Irish banks were found to require billions of dollars in assistance. "That really hurt us. We had made huge efforts to be transparent, but the Irish crisis devalued the quality of the tests for everybody," he said.