* Aims to stop problems at one bank spreading
* CCM intervention to avoid sector turmoil
* Must change regulations to streamline bank intervention (Adds background, more quotes, recasts lead)
By Andrew Hay
MADRID, April 2 (Reuters) - The Bank of Spain will do all it can to avoid a situation where the problems at one of the country's banks spread to the rest of the sector, the Bank of Spain governor said on Thursday.
"We want to avoid the situation where the problems of one individual institution become so bad that they affect the rest of the country's banks and savings banks," Miguel Angel Fernandez Ordonez told the Spanish parliament.
The liquidation of a Spanish bank should be avoided, he said.
"A liquidation could be very expensive and it should be the last resort ... we can find solutions without liquidation but rather restructuring," he said.
Concerns over a possible systemic risk prompted the Bank of Spain to intervene in savings bank Caja Castilla y La Mancha (CCM) on Sunday, he said.
"CCM is a bank with a positive balance sheet. There is no black hole ... The Bank of Spain intervened to avoid a crisis of confidence in CCM and turmoil in the markets," Ordonez said.
Ordonez reiterated the Spanish banking system was solid, but not immune to the global financial crisis.
"Our problem is one of a traditional crisis rather than a monstrous crisis thanks to some institutions which have done well, the rigorousness of the Bank of Spain and the lack of toxic assets," he said.
But he criticised the inadequate risk management at CCM as it expanded its business, particularly in Spain's property market now facing a steep downturn.
This expansion was funded largely from international fixed capital markets, generating significant imbalances, he said.
Restructuring amongst commercial banks was inevitable and must be done at the lowest possible cost for the public sector, though restructuring for the savings banks was the responsibility of the government and parliament, he said.
Spain's 45 savings banks account for more than half of the sector's bad loans and are expected to see consolidation over the coming months as asset deterioration accelerates.
However, Spain's banks do not hold toxic assets, in terms of debt rooted in the U.S. subprime crisis, but instead domestic real estate assets which he called "worrying."
But Ordonez acknowledged that the savings banks' close regional links expose them to political pressures and make their situation even more difficult.
"The savings banks exposure to the political debate makes it extremely difficult to find an efficient solution to their problems," he said.
Regulations must be changed to streamline bank intervention and the cost of possible solutions to Spain's bank problems must be cut, the governor said.
One solution for the savings banks would be to allow them to increase capital, at least to the extent the commercial banks can, Ordonez said.
He said it is "essential" that all possible private funding solutions should be sought to solve the sector's problems before tapping taxpayers. (Writing by Judy MacInnes; Editing by Erica Billingham)