The Spanish Government has decided upon an immediate strengthening of the Deposit Guarantee Fund (Fondo de Garantía de Depósitos or FGD) following upon the meeting between Prime Minister José Luis Rodriguez Zapatero and the presidents of the major banks.
The aim is to strengthen public confidence in the Spanish financial system and to protect savers and investors.
The financial markets are being hit hard at the moment, share prices plummeting as the financial turmoil continues in Europe and America. There have been some pretty big casualties so far:
Fannie Mae – nationalised
Freddie Mac – nationalised
Lehman Brothers – collapsed
Merrill Lynch – taken over
HBOS – taken over
WaMu – collapsed and sold
Fortis – nationalised
Bradford & Bingley – nationalised
Wachovia – taken over
The bailing out or guaranteeing of investors savings by governments is happening all over the place at the moment. The USA, Germany, Denmark, France, Belgium, Iceland, UK and Holland have all had to act in order to shore up financial institutions.
Iceland’s government has drafted emergency legislation to try and salvage the country’s banking system and Iceland’s financial regulator will have the power to dictate a bank’s operations and could even force a merger with another company or declare bankruptcy.
Iceland, a country of only 300,000 people, has an economy which is dominated by banking and the government is desperately trying to avoid national bankruptcy.