On Monday, Reuters citied Spanish media on a story that the Bank of Spain was considering raising the minimum amount banks must hold in provisions against potential losses on property assets.
According to the news wire, the Bank — which raised the minimum required cushion to 20 per cent from 10 per cent as recently as November — could now look to institute a base provision of 30 per cent.
Spain’s Expansion offered some more detail (via Google Translate):
The regulator keeps for weeks talks with banks and to increase the minimum allocation for real estate assets in the balance sheet carrying more than a year.
The international governing Miguel Angel Fernandez Ordonez wants to increase the required supply from 20% to 30% of the appraised value of the property, according to sources consulted by Europa Press. It would be the second tightening of the norm in less than six months.
This, as they continued, may have something to do with the Bank pre-empting the fact that lenders will only now begin dealing with a spike in foreclosures due to a) a relatively long forbearance period and b) lengthy judicial foreclosure processes in Spain:
According to experts, the Spanish bank will face in the coming months a new onslaught of the housing crisis.
Between 2008 and 2009, entities absorbed the insolvent estate of the promoters through the process of payment in kind, in a dynamic and has become the first asset management market.
From now on, will be forced to deal with foreclosure, foreclosure route, individuals in arrears.
It is estimated that banks have to absorb a flood of between 100,000 and 150,000 homes immersed in foreclosure cases.
These records are caused by unpaid claims that poured into the courts since the outbreak of the crisis, mainly from mid-2008.
Which prompts us to reprise the following chart from Nomura reflecting the current rate of provisioning at Spanish banks versus that during the country’s previous housing crisis:
Related links:
Provisioning for losses the Spanish way – FT Alphaville
Santander’s prudent provisioning, or not? - FT Alphaville
BBVA, an exercise in Spanish banking losses – FT Alphaville
BBVA’s collateral damage – FT Alphaville