30/04/2012

Spain in talks over bad bank scheme - FT.com

Last updated: April 30, 2012 8:34 am

Spain in talks over bad bank scheme

By Victor Mallet in Madrid

Standard & Poors, the US credit rating agency, downgraded 11 of Spains largest banks on Monday as the government held talks to segregate problematic property loans into one or more asset management companies to relieve the burden on struggling lenders, according to officials and bankers. The bad bank scheme is the latest attempt by the centre-right government of Mariano Rajoy, prime minister, to avoid an international rescue programme of the sort required by Greece, Ireland and Portugal.
AFP

Mr Rajoys Popular party government has deepened fiscal austerity, reformed Spains labour market and ordered banks to set aside an extra 54bn of bad loan provisions and capital buffers this year. Ministers had decided they had no need of an Irish-style bad bank. But economists say the crisis is so dire that weak banks will need further recapitalisation of about 100bn. However, official data released on Monday showed that the Spanish economy shrank less than forecast in the first quarter of 2012, contracting 0.3 per cent compared with the final quarter of 2011, against the Bank of Spains 0.4 per cent prediction last week. The National Statistics Institute said Spanish gross domestic product fell 0.4 per cent from a year ago. The government is forecasting that the economy will shrink 1.7 per cent this year and grow 0.2 per cent next year. One option for the government seeking to tackle the worsening economic crisis is for a state bailout financed by EU rescue funds, but Spain wants to avoid a blow to its credibility and the strict conditions such aid would entail. In a speech to his party on Sunday, Mr Rajoy reiterated the PPs commitment to painful economic reforms. Spain needs, and needs urgently, deep structural changes, not window-dressing, in order to grow and create employment.
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30/04/2012

Spain in talks over bad bank scheme - FT.com

The banks downgrade by S&P follows the cut to Spains sovereign debt rating last week by the agency amid a warning that the countrys economy faces contraction this year and next. The agency said the downgrade would have a negative impact on the countrys leading banks and potentially negative implications for our view of the economic risk and industry risk affecting the Spanish banking industry. S&P lowered its long- and short-term ratings on 11 Spanish banks including Banco Santander, Europes largest bank by market capitalisation, and its subsidiary Banco Espaol de Crdito. It also reduced the long- and short- counterpart credit rating of BBVA, Spains second-largest bank by assets. In addition, it placed on CreditWatch negative the long- and short-term ratings on six further banks, including CaixaBank, Spains biggest domestic retail bank, and Bankia, a collection of seven cajas, or savings banks, floated on the stock exchange last year. Government officials insist that the government-sponsored scheme should not be called a bad bank, because it will not be a bank and participating lenders will be able to park assets in it only if they have set aside sufficient bad loan provisions, independently valued. That raises the question of how it will help banks trying to raise provisions for other loans and strengthen their capital. One official said it would relieve banks of the burden of trying to sell homes and let them focus on their core business of providing credit to the private sector. Bank executives who favour the idea say it is better than a rescue for the banking system financed by the state or the EU. The scheme is being developed by Luis de Guindos, economy minister, and is in line with a recommendation by the International Monetary Fund. Last week, the IMF identified two state-backed Spanish banks one of them Bankia, a listed group of seven merged cajas or savings banks as vulnerable and said they needed to take swift and decisive measures to strengthen their balance sheets and improve management and governance practices. In a five-yearly review of the Spanish banking system, the IMF said options for managing impaired assets included setting up private or public specialised asset management companies. Some analysts say Spain may have to bite the bullet and accept help from EU rescue funds to recapitalise its banks.

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30/04/2012

Spain in talks over bad bank scheme - FT.com

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