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Spain Needs $76 Billion to Recapitalize Its Banks, Audit Finds
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An audit of Spain's banking system by the consulting firm Oliver Wyman, shows that Spanish banks would need 53.745 billion euros to be cleaned up if mergers and acquisitions underway are completed.The amount goes up to 59.3 billion euros if this does not happen. Bankia bank will need 24.7 billion euros to meet capital requirements. Three other nationalized banks need 21.5 billion euros, including 3.2 billion euros for Banco Popular. Of the 14 audited banks only 7 need capital infusions. The other banks considered healthy include BBVA, Santander and La Caixa. These findings are similiar to a preliminary finding by Oliver Wyman and estimates provided by Luis de Guindos, Spain's economy minister, that Spanish banks will need 51 billion to 62 billion euros of capital infusion. Spain's secretary of state for the economy, Fernando Jimenez Latorre, says Spain will soon request about 40 billion euros of the 100 billion euro bailout offer for banks negotiated by Spain in June with the EU. It is not clear whether the capital infusion will go directly to Spain's banks as Spain has argued, or go through the Spanish government. The audits were important to provide credibility through independent assessment of losses in Spain's banking system, and remove the fog of uncertainty that is pushing up Spain's borrowing rate in capital markets.
Reports by consulting firms Oliver Wyman and Roland Berger, and a separate report by audit firms looking into the books of Spanish banks
03/11/2011
Consulting firms estimated 62 billion euros will be needed to recapitalize Spain's banks. This is similiar to figures of Fitch Ratings and the IMF. The consulting firms of Oliver Wyman and Roland Berger used informaton provided by the Bank of Spain and did not look directly into the books of individual banks because of time constraints. The Spanish government is doing a separate detailed audit using audit firms which will examine the books of the 14 largest banks and report by the end of July. Disagreement between Mr. Alumnia, Spain's representative at the EC and the Spanish government about whether some banks should be closed.
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For Spain, Accusations of Lagging on Reforms
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Spanish Aid Plan Is Flawed, Says IMF
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Britain, Sweden, Spain and Basel III capital reserve requirements for banks
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Britain, Sweden and Spain oppose the dilution of capital reserve requirements for European banks through a broad definition of what constitutes Tier 1 capital. Germany, France and some other European countries favor a loose definition of Tier 1 capital. The systemic risks of lower reserve requirements and loose definitions of Tier 1 capital in a global banking crisis and the danger to taxpayers.
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Spanish Banks More Vulnerable Than Italy's
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Investors in Bankia to Sue Bank of Spain Over Losses
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Spain Launches Privatization of Bankia
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A Former IMF Leader Tackles IPO Challenge
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In Spanish, Bankia Starts Wooing IPO Investors
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Spain's Bankia bank
10/02/2010
The consolidation of a number of Spanish savings banks under government direction led to the creation of Bankia, Spain's third largest bank. Efforts to recapitalize these banks which have large accumulated large debt from the real estate boom is part of the Spanish government's effort to tackle the debt crisis facing Spain. Rodrigo Rato, a former finance minister and managing director of the IMF, heads Bankia and the effort to restore confidence in Spain's banking system.
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Spain's Bankia Returns to Profit
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Spain Launches Privatization of Bankia
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A Former IMF Leader Tackles IPO Challenge
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Spain's banks
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Loan Growth Suffers at Spanish Banks
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Spain to Approve Cajas Regulatory Overhaul
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Spain's troubled banks- Caja de Ahorros del Mediterraneo
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Spain Faces Short Buyers List For Troubled Caja
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Criticism of Spainâs Central Bank Grows
New York Times 10/20/2011
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The IMF's position for direct aid to troubled banks in Spain
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The troubled banks in Spain are the Caixa banks in Catulunya and in Galicia, and the Bank of Valencia, and Bankia bank. The IMF favors direct aid, and sees the approach of sending rescue aid to Spain as not working to restore confidence in 2012.
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Spain Needs $76 Billion to Recapitalize Its Banks, Audit Finds
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The European Banking Agenda in 2012-2014- deposit insurance and powers of banking supervision transferred to a European supervisory authority
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On the agenda during discussions in June between the EC, ECB and the German government, is deposit insurance for eurozone banks, and a supervisory financial authority for eurozone banks (Single Resolution Mechanism) within the EC with powers transferred from sovereign states to the the supervisory banking authority. These issues take priority because of fears of bank runs on banks in Greece, Spain and other countries. France is pushing for a new Eurozone Architecture that will form the basis of the euro currency.
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ECB Hits the Road for Star Supervisors
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New York Times 10/20/2013
ECB Nominates French Regulator for Euro-Zone Post
Wall Street Journal 11/23/2013
ECB Nominates New Banking Regulator
New York Times 11/20/2013
The impact of the housing bubble related banking crisis on small and medium sized business in Spain
02/25/2010
About 60% of the economy and 80% of the jobs in Spain are with small and medium sized business. The consolidation of banks is leading to loss of local contact. The need to build capital reserves to cover bad loan losses means banks are calling in loans to these businesses. This is happening in smaller towns and cities across Spain, and will worsen the already high 25% unemplyment rate. The credit squeeze is hurting the recovery.
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Europe’s credit crunch: Mend the money machine
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German Court to Weigh Bond Buying by E.C.B.
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Europe Bonds May Offer More Value
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Spain's debt financing and bond issuance in 2012-2013
01/04/2011
An improving situation after Draghi's policy statements on July 23, 2012 about the ECB's committment to the euro and reducing excessive borrowing costs of Italy and Spain.
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One of the "must do" critical rules is that strong aggressive action and sound steps be taken early when borrowing rates are still favorable and there is time to respond and bring the debt situation under control. French prime minister Ayrault puts this succintly: "If we don't put a stop to this taxpayer money will keep going to pay for debt reimbursement." Britain has an extra margin of safety because of its established banking systems and experience, France because of support from Germany, a stronger economy and industry-government cooperation, Spain and Italy lack this extra margin of safety and needed even more vigilance and aggressive steps.
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Rajoy's history cautiously embracing politics as Spain emerged from the Franco era, his father's advice to avoid politics after the searing experience of his grandfather in Galicia, the early years in Pontevedra, Galicia, and regional pride in Galicia, are described in Rajoy's book "En Confianza." Regional pride and the European experiment appear to be intertwined, just as Germany would like to see its political entity merged with a European entity, Spain would like to see its political entity merged with the European entity, because of a searing interwar period. Rajoy would genuinely like to see the European experiment go forward as he made the decision to accept EU aid.
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A detailed account of the unfolding crisis at Bankia bank in Spain during 2011-2014
04/01/2009
An account of the key players and the ufolding of critical events in the IPO offering for Bankia, and the unraveling of the bank in the months that followed, as the Spanish regulators and government failed to get a handle on problems and instead put their hope on an improving economy. On May 3, Mario Draghi warned about the problems at Bankia in Barcelona. On May 4, the heads of Spain's largest banks BBVA, Banco Santander and Caixa, told the government it had to takeover Bankia, setting in process the events leading upto the acceptance of $125 billion in EU aid to recapitalize Spain's banking system. Bankia was put together from seven failing cajas savings banks. The problems related to the housing bubble are seen throughout the cajas savings banks.
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German banks exposure to Spain of $139.9 billion in 2012 and Germany's efforts to manage the exposure
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Wall Street Journal 11/29/2012
Rescue of Spain's banks with a $125 billion committment from the European Financial Stability Facility (EFSF)
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EU finance ministers persuaded Spain to borrow from the EFSF and place the money in a special fund intended to recapitalize its banks. The IMF will provide some oversight over the banks but no conditions or oversight will be imposed on Spain only on its banking system as a compromise. Problems in the banking system arise from a housing bubble in Spain and failing cajas savings banks. Spain has already committed to adhering to fiscal deficit targets on a longer term basis with the EU. This makes it a rescue of the banks more than a bailout of the kind deisgned for Greece, Ireland and Portugal.
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Spain requests bailout help - The Washington Post
Washington Post 06/10/2012
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02/22/2011
Jaime Caruana, Rodrigo Rato and Vinals are senior Spanish banking officials who worked for the central bank and at the IMF. Caruana is head of the Bank of International Settlements in Bases (BIS), and Vinal heads a department at the IMF. Rato resigned from Bankia bank after its takeover by the government. Experts say they failed to exercize proper oversight of Spain's banking system and in their positions at the IMF failed to draw early attention to the problems.
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Spain's Cajas savings banks
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The management and culture of the Cajas Savings banks in Spain- the Cajas in Galicia
02/25/2010
The Cajas, local savings banks, evolved in the post Franco years into banking institutions that controlled significant deposits and expanded into the real estate sector. This happened under Cajas leaders who ran the cajas for many years and became highly influential in the political system. After the bubble burst these Cajas had to be consolidated under new management by the federal government in Madrid. Prime minister Rajoy of Spain comes from the same region of Galicia in northwestern Spain. Today the Cajas are seen as a symbol of the bubble years and lack of financial controls.
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New York Times 05/17/2013
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Economist 07/31/2010
Spain's banks: Two cheers, three tiers
Economist 10/02/2010
The German parliament's vote in July 2012 on the $125 billion loan committment to Spain's banks
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The need for opposition support to pass the legislation required to provide loans to Spain's savings banks. A committment of $125 billion in loans to Spain's banks was made by the EU. The efforts of the Merkel government to win popular support from a skeptical German public includes videos on YouTube in July 2012. The opposition SPD says it will look at the loan arrangements carefully to make sure this leads to a healthy Spanish banking system with the required changes being made at the banks.
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Germany Makes Last Pitch Before Vote
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German Parliament Backs Spanish Bank Plan
New York Times 07/19/2012
Spanish Bank's Ex-Leader Defends His Record There
New York Times 07/26/2012
France Raises Taxes in Tough Budget
Wall Street Journal 09/28/2012
The urgency for recapitalization of European banks in 2011-2015
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EU banks face potential losses of 300 billion euros from troubled EU countries. 120 billion euros from Italy, Spain and Belgium, 60 billion euros from Greece, 20 billion euros from Ireland and Portugal, and $100 billion euros from other banking exposure, accordig to the IMF. IMF managing director, Christine Lagarde, has pointed to the urgent need for recapitalization of European banks,urgently because restricted lending by EU banks in the absence of recapitalization could further damage the economies of EU countries.
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Central Bank Details Somber State of Europe’s Banking System
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Wall Street Journal 07/04/2015
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Italy Agrees on Fund to Support Battered Lenders
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Spain's banks and housing construction in 2011-2012
02/25/2010
Continued construction in housing suported by Spanish banks in 2011-2012. This is happening when a huge inventory of residential units estimated by some analysts at over 1 million remains unsold. It could further dampen home prices.
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Wall Street Journal 02/08/2012
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Spanish and Italian banks bought a large portion of the goverment bonds of their countries under the Long Term Financing Operation launched by ECB chairman Mario Draghi in Dec. 2011. This calmed the financial markets by lowering the bond yields for Spain and Italy, but raises new risks as analysts focus on the risks of the deficit and declining economy in Spain.
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Spain- debt, credit ratings, and borrowing costs 2011-2014
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New York Times 09/27/2013
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Grouped Articles
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Wall Street Journal 11/29/2012
Spain's economy 2010-2013
07/22/2010
Grouped Articles
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Italy Seeks to Tackle Youth Jobless Problem
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