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8/3/2019 The Pain in Spain - FT
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Printed from: http://www.ft.com/cms/s/0/a95a13fa-5196-11e1-a9d7-00144feabdc0.html
February 7, 2012 7:15 pm
The Spanish banking system, split between large, solid international banks and the politicisedregional cajas, defies categorisation. While the banks domestic outlook continues to worsen,
the policies governing them are going from good to better. If Europe ever fixes its banking
system, it may be because Madrid has shown the way.
For much of the Spanish financial system, access to market funding remains hard to come by.
Central bank liquidity can ease the pinch. But it cannot remedy the cause, which is the
continuing rot in Spanish bank assets, especially real-estate loans and repossessed collateral
whose value collapsed with the construction bubble. The government counts more than half
of 323bn in real-estate assets as troubled. Even as successful a bank as Santander, which has
gone through years of crisis without making a loss, set aside 1.8bn for bad Spanish property
loans just in the last quarter.
Things could have been worse. Spains rules for loss provisioning left it better equipped than
other countries with similar housing bubbles. Even so, banks losses have been
underestimated. The worsening recession, partly self-inflicted by Spains effort to outdo the
general eurozone fiscal masochism, will make them worse still.
The new centre-right Spanish government is wise to tighten the screws on the banks. In this it
follows the good work of its socialist predecessor, which in 2010 pushed for tougher stresstests than the rest of Europe wanted. Consolidating the caja sector through shotgun marriages
showed more courage than other European states in tackling a highly politicised sector.
Spanish banks still need the further reform prescribed by Madrids new government. They
must find at least 50bn this year to hold provisions against possible losses ranging between
35 per cent and 80 per cent depending on the asset. A slight time extension is given as a
carrot to banks that merge. The caja sector will come out transformed for the better.
Still, Spanish authorities cannot rest easy. The recession will take a toll on non-property
assets that have not been cleansed as scrupulously, such as personal loans. And although
Madrid claims that taxpayers are not put at risk, banks with no other options will be able to
tap the state restructuring fund, which the government is topping up. Madrid should be
prepared to write down unsecured bondholders in the case of truly hopeless banks. That
would make Spanish banking policy an even better example for the rest of Europe to follow.
ain in Spain - FT.com http://www.ft.com/intl/cms/s/0/a95a13fa-5196-11e1-a9d7-00144
08/02/20
8/3/2019 The Pain in Spain - FT
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THE FINANCIAL TIMES LTD 2012 FT and Financial Times are trademarks of The Financial Times Ltd.
ain in Spain - FT.com http://www.ft.com/intl/cms/s/0/a95a13fa-5196-11e1-a9d7-00144
08/02/20