Spain's Santander: Emerging Markets Bear Burden Of Higher Capital Requirements

The chief executive of Spain's Banco Santander SA (STD) said Friday that liquidity restraints for global banks could have a disproportionately negative impact on emerging markets as they make long-term financing more difficult for infrastructure projects.

Doubts about the impact of heightened capital requirements and other banking regulations on profits, combined with uncertainty about risks related to the euro-zone's debt problems, have prompted banks to consolidate their balance sheets and cut back on lending, Alfredo Saenz said at an Institute of International Finance conference parallel to the Group of 20 meetings in Mexico.

Saenz said there's a risk that these issues coalesce to "form a paralysis" in which it's almost impossible to take business and lending decisions.

Santander, the euro zone's largest bank by market value, increased lending by 4% in 2011 as demand for credit in Latin America offset a shrinking loan book in Europe.

Santander's Mexican unit is Mexico's third-biggest bank by deposits and loans, with more than a 12% market share in both areas.

-By Amy Guthrie, Dow Jones Newswires; amy.guthrie@dowjones.com