Spain opened its troubled savings banks to private investors on Friday, acting to limit political interference in a sector plagued by bad property loans as it stepped up efforts to overhaul its financial system. The reform is a cornerstone of government measures to ward off fears the euro zone's fourth largest economy may suffer a debt crisis similar to Greece - though an analyst said raising new funds for the banks in the current climate would be tough. The new law, which the government said opposition lawmakers would approve, complements an ongoing consolidation of Spain's unlisted regional lenders, known as ‘cajas'. Economy Minister Elena Salgado said that process is virtually complete and has shrunk the network of 45 savings banks to 19, all of which EU stress tests had shown were solvent. “This restructuring process has brought strength,” she said. Analysts said access to private capital and the curbing of political influence will help to bring the savings banks, set up hundreds of years ago to protect small farmers during years of poor harvest, into line with listed banks. “In situations of crisis it's difficult to raise capital, but this reform is useful in the medium and long term,” said Garcia Pascual at Barclays Capital. “The general purpose is to try and de-link the cajas from the strong political influence over the sector,” added Giada Giani, analyst at Citi. “It's a positive sign for the sector.” Savings banks account for around half of the assets and deposits in Spain's financial system. Europe-wide stress tests, due to be released on July 23, would show they and all of Spain's other banks are solvent, Salgado said. All the savings banks are taking part in the tests, designed to evaluate banks' resilience in a crisis. Although the cajas avoided the meltdown stemming from US mortgage-related assets during the first part of the crisis, they are heavily exposed to Spain's own property crash.
