UPDATE 1-Bank of Spain to tighten supervision of banking sector
MADRID, Jan 9 (Reuters) - The Bank of Spain said it planned to tighten banking supervision in line with European recommendations by putting permanent inspectors in 16 of the country's banks.
This will allow the central bank to keep a closer eye on more of Spain's banks, not just Santander and BBVA , the two biggest which already have permanent Bank of Spain inspectors.
The Bank of Spain's changes follow a report in newspaper El Pais on Sunday of an internal audit that revealed irregularities in how savings banks were inspected and accused the central bank of turning a blind eye to potential signs of wrongdoing.
"If what has come out in the media is turned over to the Attorney General, we will take action. We will ask the Bank of Spain to confirm the media report because it could seriously affect the credibility of (Spanish) institutions," Attorney General Eduardo Torres-Dulce told reporters on Wednesday.
After Spain's property boom and bust, banks were left with a huge capital shortfall that led to a European bailout of 39 billion euros (US$51 billion) and creation of a 'bad bank' to take over the banks' toxic real estate assets.
One of the conditions for getting European aid was an internal revision of the Bank of Spain's supervisory procedures.
With the announcement of tighter banking supervision, the Bank of Spain also said it "deeply regretted" that some of the information in the media report could call into question the central bank's supervision duties.
The central bank said none of the allegations referred to in El Pais "correspond to possible irregularities related to concrete supervisory actions."