Thursday, May 10, 2012

Will Spanish banks survive?

Back in 2009, a friend of mine asked me " if the Americans had to "nationalize" many banks and had to inject moneys in GM and others, if the British, French and Germans had to follow the same recipe, if Iceland went broke, is it possible that Spain had n casualty among banks (with the exception of Caja Castilla La Mancha).

Now we know how it happened, is because the Bank of Spain (Regulator) consistently swept the reality under the rug.
Now 178.000 millions of euros derived from losses in the real estate market, have to be acknowledged.
The economy of Those actions should have been:
1 - To recognize that the price of houses, apartments and land were decreasing as rapidly as they had been growing before (1990 to 2007).
2 - As a consequence of that a higher loan to debt ratio was requiring a higher capital level
3 - The decreased economic activity and high unemployment rate (24%) were deteriorating the quality of the RE portfolios of commercial and saving banks.
Now May 2012 the Government has to inject capital in the fourth largest bank (Bankia), has already capitalized other seven institutions and it will be required that the whole system creates reserves for additional 50.000 millions of euros.
The consequence of all this will be weaker financial institutions simply because the government did not do what it was suppose to do.
The lack of actions from the Government of ex President Rodriguez Zapatero (April 2008 Nov.2011), worsened the situation of the whole financial system, which until the 2007/8 crisis was considered one of the strongest of the world.