by Calculated Risk on 3/29/2009 08:25:00 PM

From Bloomberg: Spain Rescues Caja Castilla With EU9 Billion in Funds (ht Carlomagno, Bob_in_MA)

The Spanish government said it will provide as much as 9 billion euros ($12 billion) to Caja Castilla-La Mancha to shore up the regional lender’s finances and protect depositors in the first bank rescue since 1993.
...
Loan defaults in Spain have tripled since the global financial crisis began in 2007, ending the country’s real estate boom and boosting unemployment to a European-Union high of 14 percent. The economy is in the grip of its worst recession in half a century with the government forecasting a contraction of 1.6 percent this year.

To understand a "Caja", here is a Financial Times article on the Spanish banking system from last October: Cajas in the balance

... Half of Spain's financial system consists of 45 unlisted mutuals owned by local governments, called cajas. They are entirely domestically focused, therefore highly exposed to property, and also - because they cannot raise equity - potentially short of capital.

An estimated 70 per cent of cajas' combined €900bn loan portfolio is in real estate. Bad debts doubled last year and Credit Suisse expects them to double again to 5 per cent, twice the current European average. Add in the odd bankruptcy - such as property developer Martinsa Fedesa's recent collapse - and this could eliminate the cajas' provisioning cushions. That presents a problem. ...

... Rescue deals for some of the smaller, more opaque banks look inevitable. The financial fuse on Spain's property bomb is burning slowly. But the bang could still be big.

The Pain in Spain happens mainly in the - uh - Cajas.