How To Guides
- Childbirth & Education
- Legal Formalities
- Pensions & Benefits
- Property & Accommodation
Did you know...?
... Telefonica are NOT the only service provider of Telephone Lines, Internet Access or Mobile Phones?
Tumbit recommends Telitec Communications. Find out how Telitec Communications can help you here!
- Airports and Airlines Spain
- Paramount Theme Park Murcia Spain
- Corvera International Airport Murcia Spain
- EUR weekly currency update - 28 November 2014
- Mr Grumpy v Angeles Duran
- Meet Wincham at The Homes, Gardens & Lifestyle Show, Calpe
- QROPS 2014
- Spain Increases IHT in Valencia & Murcia
- Removals to Spain v Exports from Spain
- The Charm of Seville
- Gibraltar Relations
- Retiro Park : Madrid
- Wincham announce opening of Marbella office
- Community Insurance in Spain
- Calendar Girls
- Considerations when Insuring your Boat in Spain
- QROPS – HMRC Introduces changes that create havoc in the market place
- QROPS – All Change From April 2012
Spain's banks in focus ahead of Bankia rescue plan
Spain may say on Wednesday how it will plug a hole of at least 8 billion at Bankia, part of an effort to clean up a banking sector laden with bad debts and stop the country sinking further into the euro zone debt crisis.
Economists say Spain has little hope of emerging from recession unless there is a wide-ranging bank recapitalization and many predict it will need an international aid package similar to the ones handed out to Greece and Ireland.
Spain says it does not need outside money and government sources told Reuters on Tuesday it would outline a rescue for the country's 4th largest lender, formed from the merger of seven banks during an earlier unsuccessful restructuring.
The government has just picked Goldman Sachs to value Bankia and consultancies Oliver Wyman and Roland Berger were hired to audit other banks' loan books, damaged by a property crash that helped push bad loans to their highest in 18 years.
Economy Minister de Guindos is expected to give details on the government's plans for Bankia in parliament at 1600 GMT but economists said the focus was on the banking sector as a whole.
"The market has moved beyond Bankia. How much Bankia will get in aid is not going to make a big difference," said Martin van Vliet, senior economist at ING.
"The question is now about the long-term solvency of parts of Spain's banking system, especially what is going to happen with mortgage loan default. This concern is not being addressed."
A leading banking industry group, the Institute of International Finance (IIF), has said Spain's banks could need another 76 billion to cover losses as bad debts might rise as high as 260 billion.
Bankia needs to find about 7.5 billion by the year-end to meet government demands to cushion itself against real estate losses. It also needs to raise about 1.3 billion by June to meet strict European Banking Authority capital rules.
Spain last week converted 4.5 billion of state loans to parent company BFA (Banco Financiero y de Ahorros) into equity, giving it a majority stake in Bankia and partly nationalizing the lender.
One source said de Guindos was likely to announce the final taxpayer's bill of Bankia's rescue. He has estimated the state will put less than 15 billion into the latest of the four Spanish bank rescues in recent years.
A second source said talks on the size and form of the bailout - through loans, equity or cash injection - were being held between the economy ministry, the Bank of Spain, Bankia and Goldman Sachs.
Financial markets are closely watching the developments in the banking sector to see whether Spain will become the next casualty in the debt crisis that started in Greece. Four of Greece's largest banks got an 18 billion recapitalization on Tuesday.
Spanish bond yields were trading at 6.16% on Wednesday, not far off 7%, the level that is seen as unsustainable for a country's finances. Bankia's shares were little changed at 1.73, against a blue-chip Spanish index 2% lower.
The appointment of outside auditors, as well as U.S. bank Goldman Sachs on Bankia, has been seen as an effort to reassure investors and EU leaders, who will meet at a summit on Wednesday, that Spain has the situation under control.
Banking sources questioned whether these external consultants could wring more information from lenders than has already been given to institutions like the IMF and the central bank.
One banker said the appointment of external auditors indicated a lack of trust in the central bank.
"The Bank of Spain has a great team, they could always hire some accountants. I don't understand why the government agreed to outside auditors. It seems as if people don't trust the central bank," said one investment banker in Madrid.
There have also been questions about the size of the fees the companies would earn while the government is cutting spending to improve its finances.
However, advisers who have worked on other government bank restructurings said fees for Goldman Sachs would likely be lower than for other deals, with most firms agreeing to do such work for the prestige and in the hope that it brings new business.
Several financial and government sources told Reuters last week that the strategy of the Spanish authorities would be to clean up, downsize and sell Bankia within 3 years.
That plan could however derail if the several capital gaps identified in the accounts by the lender's auditor Deloitte were too large, the sources said.
Latest News & Stories
- Spain: where trade union leaders are criminalised for striking
- Spain to re-establish state lottery after court ruling
- Contribution by Spain Lifts UN Green Climate Fund to $9.7 Billion
- Spain retail sales post biggest rise in a year in Oct
- Spain's Telefonica says seeks global alliance with BT
- Rajoy: There is no such thing as generalized corruption in Spain
- Spain allocates EU52 Mln for rural broadband deployment
- Spain Experts Prepare Stem Cell Transplant against HIV
- Rajoy to declare new anti-corruption law
- Spain Hosts China - Catalonia Tourism Meeting