Well, Spain can’t blame los especuladores medios anglosajones for this one.
The Spanish newspaper Cinco Días says the country’s banks are losing access to interbank lending (translation and emphasis FT Alphaville’s):
“The worst thing is that a week ago, coinciding with Fitch’s downgrade of three Valencian entities – Bancaja, CAM and Banco de Valencia – Spanish bank Banco Sabadell suffered a heavy penalty on the interbank market because of the mistrust generated by the sovereign. But it’s something we’ve paid. A high price – to 1%, 70 basis points above the average in Europe, but there was some movement. Now, no foreign entity in the interbank market is funding us,” said another executive at a middle-level bank. The truth is that the penalisation of Spanish banks is so high that they cannot enter. “For several weeks no issues, even with a state guarantee. Neither Santander or BBVA, banks acknowledged as solvent, may place bonds. Even the Catalan government last week could not bring off an issue and had to withdraw. It’s happening throughout Europe, but the situation is more serious in Spain, “says another manager.
As the paper continues:
An executive of a caja said that the problem is that nobody wants Spanish debt as collateral at the moment. “Only the big Spanish banks manage to get some funding, but with bonds from other countries like Germany, with national [debt] nothing.”
And as the president of an unspecified caja is quoted:
“So we can not give credit to our customers. We can only fund through the ECB at 1%. The Spanish banking sector’s recourse to the ECB is already at 15%. A year ago was 12% and just over two, 10%,” he recalls.
Sounds rather grim, doesn’t it?
Update (1240 UK time): Well, it sounds grim… although it depends where you’re looking. Laurent Fransolet of Barclays Capital comments (link ours):
Frankly the Bank of Spain data, which is daily, and has got everything until yesterday [8 June], does not show that much in terms of repos or overnight interbank: maybe a few bp higher in terms of cost (and more differentiation between max and min rates), and maybe a little bit less than recently in total amount in repos (but an increase in unsecured) but not exactly a market shutdown.
Related links:
Deposits at ECB Increase to Record 364 Billion Euros – BusinessWeek
Spanish banks – Facts and Fiction – FT Alphaville
Calming down on bank credit risk – FT Alphaville
Europe’s grim sovereign-bank loop – FT Alphaville