By Jesús Aguado
MADRID (Reuters) - An independent audit of Spanish banks confirmed a manageable 59.3 billion euros in extra capital is needed for them to ride out a serious economic downturn, buying time for Prime Minister Mariano Rajoy who faces intense pressure to seek a bailout.
The audit, carried out by consultant Oliver Wyman, is a condition of getting European funds to patch up Spanish banks damaged by a prolonged real estate crash and identifies which banks need more capital and precisely how much each requires.
The "adverse economic scenario" the audit was based on is fast becoming reality in Spain as spending cuts and tax hikes throttle any recovery in the euro zone's fourth largest economy, driving up unemployment and prompting growing unrest.
Spain has replaced Greece, Ireland and Portugal as the main threat to the survival of the euro currency project.
Both the strict 2013 budget presented by Rajoy's government on Thursday and the audit of 90 percent of Spain's banking system are necessary steps for Madrid to request sovereign aid and trigger a European Central Bank bond-buying program.
The audit results, which will be used to determine how much aid Madrid will tap from an agreed 100 billion euro European credit line, were in line with government and market expectations and were applauded by the European Commission.
"That's another layer of uncertainty that's off the table," said David Schnautz, rate strategist at Commerzbank.
BANKIA IS WORST CASE
The audit identified the bulk of capital needs at the four banks which have already been rescued by the Spanish government.
The worst case is Bankia, the result of an ill-fated, seven-way merger between unlisted savings banks which was taken over by the government earlier this year.
The capital shortfall for these banks is 49 billion euros, with Bankia accounting for half of that. The European Commission said the aid needed for the banks would be determined in the coming months, based on the results published on Friday.
More than 60 percent of the system, including heavyweights Santander, BBVA and Caixabank did not need extra capital under the terms of the audit.
"The results confirm that the Spanish banking sector is mostly solvent and viable," the Economy Ministry said in a statement.
The banks that will need extra capital under the stressed scenario are Banco Popular, Banco Mare Nostrum and a new entity due to be formed by a merger between former savings banks Ibercaja, Liberbank and Caja 3.
These banks will next month present plans to the Bank of Spain outlining how they intend to raise capital by their own means including share placements, asset sales and forced losses on subordinated bondholders.
This could shave millions of euros off their final requirements and reduce the amount Madrid finally taps from the credit line agreed with Brussels in June.
The audit is also a precursor to the setting up of a "bad bank", aimed at siphoning off the foreclosed property and unrecoverable loans to developers that have weighed on lenders' balance sheets since a 2008 property crash.
Spain is suffering its worst credit crunch in 50 years and designers of the bank bailout hope these steps will lead to a resurgence of lending to families and businesses.
(Additional reporting by Emilia Sithole-Matarise, Tracy Rucinski and Julien Toyer; Editing by Alexander Smith)