SPAIN's banks would need ¤51bn-¤62bn in extra capital to weather a serious downturn in the economy, less than the ¤100bn aid package offered by the euro zone, independent audits showed yesterday.

The Spanish government would use the audit reports to determine how much aid it will take to recapitalise its ailing lenders.

Spain said it would make a formal request in the next few days but details on how much each bank would need will not be known until September, leaving analysts with mixed feelings about the capacity of the audit to restore confidence in a sector shut out of global markets.

Doubts about the economy and the banks have moved Spain to the centre of the euro-zone debt crisis, forcing the Treasury to pay its highest yield since 1997 to sell less than ¤1bn of five-year debt yesterday.

"The (capital needs) are lower than the amount agreed on with the Eurogroup to give security and confidence to markets, with enough room to carry out the restructuring," Fernando Restoy, deputy governor of the Bank of Spain and head of bank restructuring fund FROB, told a news conference.

The audit said Spain's three biggest banks - Banco Santander, BBVA and Caixabank - would not need extra capital even in a stressed scenario. It said the problems were limited to a small group of banks on which the state was already acting.

The economy ministry said the audit was the first step in evaluating the banks.

A second and more detailed audit, conducted by the big four accountants - KPMG, Deloitte, Ernst & Young and PricewaterhouseCoopers - is also under way. This will involve an inspection of each bank, an assessment of the banks' risk control processes and a more exhaustive valuation of their assets.

It will be published in September and will enable the government to determine more precisely how much each bank needs and whether this should be injected through equity stakes or loans.

The banks will then have nine months to raise the capital and will be able to include in their calculations up to ¤15bn in capital already foreseen by the first of two banking reforms put forward this year by the government.

The auditors' findings were based on an adverse economic scenario which set a core tier one capital requirement for banks at 6% if gross domestic product shrank 4,1% this year and 2,1% next year.

Reuters