Until relatively recently, academics and Western policymakers overwhelmingly supported the official position of the European Union. Nowadays we live in a world where the head of the International Monetary Fund — who also happens to be the former Finance and Economy Minister of France — publicly says the “inherent volatility” of cross-border capital movements is a problem. Read more
Spain’s fiscal management seems to increasingly be a case of plugging holes, watching new ones appear, ignoring them, then relenting and also plugging those… all while delaying a clearly inevitable request for assistance from Brussels.
On the positive side, the auction on Thursday marked the completion of the country’s planned funding for this year (€86bn, but there’s also €10bn in private placements issuance). On the negative side, the €4.7bn debt sale saw unenthusiastic demand, which has helped spook investors and driven 10-yr yields up. Read more
Some more details about Spain’s bad bank are filtering through, mainly on how it might function in practice. And analysts are finding that the more they find out, the more concerns they have.
On Thursday Credit Suisse’s Ignacio Cerezo and Andrea Unzueta summed up their latest thoughts on AMC following a meeting with Cuatrecasas, legal advisers to the bank recap fund FROB. Overall, they see the new details that emerged as ” incrementally negative” for both Spain and its banking sector. Read more
This is something we have been meaning to get around to for a while.
It’s about that Spanish ‘bank jog’ making headlines all over the place and seems pretty timely right now, what with the banking deposit scheme thing floundering so badly. From the FT: Read more
Not ideal timing for a €3.5bn bond auction for Spain on Thursday – hours before Draghi speaks.
No matter. Targets were hit, although market participants described the mood amongst investors as “reluctant.” Read more
It doesn’t come as much of a surprise that the Spanish financial sector is having to increasingly rely on ECB funding.
However, data released by the Bank of Spain on Tuesday reveals the sheer speed at which this happened: Read more
From the Bank of Spain on Wednesday, with impeccable timing:
(Click to expand) Read more
Spain sold €9.98bn of bonds maturing in 2015 and 2016, including a new three-year benchmark security, twice the maximum target of €5bn euros set for the sale, Bloomberg reports. The Bank of Spain said demand for the new three-year benchmark bond was 1.8 times the amount sold, versus 2.7 previously. The yield on the new benchmark, which matures in July 2015, was 3.384 per cent, compared with 5.187 per cent when Spain sold notes maturing in April 2015 at an auction in December, said Bloomberg. Italy was also in the market, selling €8.5bn in 1-year treasury bills and €3.5bn in 136-day bills, according to the FT. The ECB is set to announce its decision on interest rates at 12.45 GMT and is widely expected to keep its main refinancing rate on hold at 1 per cent, although a few have forecast a quarter-point cut.
Spain says it expects its banks to set aside up to €50bn in further provisions on their bad property assets as part of a new round of reforms for the country’s financial sector, the FT says. Luis de Guindos, economy minister in the centre-right government that took office two weeks ago, said “If you take international valuations as in the case of Ireland, at the most you are talking about the need for €50bn of extra provisions [by banks in Spain]. In the great majority of cases, they can provide it themselves from their profits … and it could be done not in one year but over several years.” The banks have already covered a third of an estimated €176bn are bad, substandard and repossessed housing and property loans, and were expecting to be told to set aside a further 20 per cent. An extra €50bn – more than 28 per cent – would be more of a stretch, especially when they are simultaneously trying to increase capital ratios to meet European regulatory demands. The FT’s global markets overview says markets became skittish amid speculation Spain may need an international bail-out after the regional government of Valencia was late repaying a a €123m debt to Deutsche Bank and did so only with central government help. Bloomberg reports that Valencia, Spain’s most-indebted region, denied it received help from the central government. “There was no guarantee from the Treasury,” Jose Ciscar, vice president of the local government, told journalists in Valencia. “We have paid this debt with the region’s own resources through other financial mechanisms.” An emailed statement from the regional government also said the payment was a week late, a “habitual” delay.
Definitely, Barclays is bullishness in Spain. Himself CEO of the company, Bob Diamond , has been recognized, and several sources familiar with the situation confirmed that the British bank is considering comprehensively the status of CAM [Caja del Mediterraneo] and has asked for some type of guarantee to the Bank of Spain to be with her. . .
Oops. How unfortunate. The Google translation of this El Confidencial story (updating on Barclays’ supposed interest in a Spanish caja) came out rather steamy at the end there. Read more
The Bank of Spain has ordered the four savings banks or cajas that were set jointly to form the new Banco Base to outline “immediately” their plans after the collapse of the merger on Wednesday evening, reports the FT. Banco Base, which would have been Spain’s sixth-largest lender by assets, was the only merger not to have been finalised by Monday’s deadline for all Spanish banks and cajas to explain how they intended to recapitalise themselves if they fell short according to the central bank’s calculations. On Tuesday, Banco Base’s provisional managers said they had asked the Fund for Orderly Bank Restructuring (Frob) for an extra €2.78bn ($3.9bn), almost double the €1.45bn capital shortfall calculated by the Bank of Spain last week. FT Alphaville meanwhile explains why it is so difficult to estimate the needs of Spain’s cajas.
Fact du jour — Spanish debt-to-GDP ratios aren’t actually (relatively) that bad.
A top-read story on Bloomberg this Thursday morning?
One that combines the words ‘foreclosed homes’ with ‘Spain’ and ‘tripled’ : Read more
How are the European bank stress tests like a butterfly?
We think we know — thanks to Deutsche Bank’s take on the Spanish banks’ stress-test results on Monday. Read more
Ever wondered exactly who’s been holding Spanish government debt recently, who’s been cutting down — and who might change their mind in the coming months?
Wonder no further. Read more
Andrés Iniesta took his opportunity in the World Cup final, but will Spain take advantage of the chance offered by stress tests to restore market confidence in its financial system and economy?
It’s a question that Jacques Cailloux, chief European economist at RBS, has been debating with his colleagues, and his conclusion is that Spain will fluff the chance to restore international investors’ confidence in the medium term solvency of its banking sector (emphasis ours throughout): Read more
All hail the Spanish central bank’s long-awaited changes to the way banks provision for loan losses.
The proposed amendments are available on the Bank of Spain’s website, in Spanish. Read more
Saturday’s pain in Spain came in the shape of the seizure of CajaSur, one of the country’s troubled savings banks (cajas). The cajas, you might recall, are in the midst of a rather grandioso restructuring.
Plagued by souring real estate exposure, and pressured by commercial banks like Santander and BBVA, the cajas are meant to have been restructuring themselves; merging with each other to alleviate inefficiencies and weaknesses in the Spanish banking system. The problem is that some of them, err, haven’t — with results like the weekend takeover of CajaSur by the Spanish central bank. Read more
In case you missed these stories…
Bank of Spain rescues regional lender
The Bank of Spain at the weekend seized control of CajaSur, an ailing savings bank, in the latest sign of problems at Spanish savings and loan institutions after the collapse of the housing bubble.
Hinduja pays €1.35bn for KBC arm
Hinduja Group said on Friday it had paid €1.35bn ($1.7bn) for the private banking arm of Belgium’s KBC, in one of the biggest financial services acquisitions by an Indian family-owned enterprise. Read more
The Bank of Spain released the February data for Spanish banks’ non-performing loans on Monday, and the details aren’t pretty.
Like much else in the wreckage of Spain’s pre-recession property boom, the performance of these banks’ loan portfolios is less than reassuring, Execution Noble’s Joe Dickerson notes: Read more
FT Alphaville look at a ‘catch-45′ problem for the cajas of Spain. Read more
European banks and troubled commercial real estate: it’s not over until it’s over. And as a report from DTZ, the London-based property broker, argued on Monday — it’s really not over at all.
Indeed, those assets could well trouble the key post-Greece problem sovereigns of the hour: Ireland, the UK, and Spain. Read more
The Bank of Spain is expected to further increase the provisions it demands of Spanish lenders to cover real estate held more than a year. The central bank’s move would further dent bank profits already hit by recession, say analysts. In November, the central bank raised its provisioning requirement from 10% of the property’s value to 20% for real estate held more than a year, and is now expected to raise it to 30%, although it has yet to notify lenders formally.
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. Read more
The Spanish government and the Bank of Spain on Sunday began the country’s first bank rescue in the current financial crisis, providing up to €9bn in liquidity to Caja Castilla La Mancha, a troubled S&L institution, and replacing its directors with central bank nominees. Pedro Solbes, finance minister, said the bailout of CCM, which accounts for less than 1% Spain’s financial system assets, should not be compared with the rescue of a big bank such as Banesto.