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Spain to Ramp Up Bailout of Banks
worldtraveller
Posts: 14,013 Forumite
Spain plans to pour billions more euros into its troubled savings banks and force them to be more open about their lending practices, people familiar with the matter said, an acknowledgment that previous efforts to fix the banks have fallen flat as the country seeks to ward off an international bailout.
In a first step, Spain is preparing to issue €3 billion ($4 billion) in debt in coming days, the people familiar with the matter said.
Government officials are putting plans in place to eventually raise as much as €30 billion, according to these people, though some say the final tally will be less.
The hope is that a series of capital injections will quell investor jitters about the savings banks, known as cajas (literally, "boxes"), which have been a thorn in Spain's side as it seeks to convince investors that the country's finances are stable.
Raising any new capital for the cajas carries risks, as it comes on top of Spain's existing financing needs. Economists estimate that the country needs to borrow €125 billion this year just to finance its deficit and roll over maturing debt.
Many of the cajas, which account for €1.3 trillion in assets—or 42% of total bank assets in Spain—used liberal lending practices to fuel a decade-long housing boom that went bust and left many of the institutions holding billions in bad loans and facing heavy losses.
Spain's government debt isn't that high compared to other troubled countries in the euro zone, such as Greece and Ireland. But borrowing costs for Spain soared at the end of last year after Ireland received a €67.5 billion bailout from the European Union and the International Monetary Fund.
After a successful bond issuance by Spain earlier this week costs have ebbed some. Nonetheless, investors worry that the authorities haven't come clean on the problems of the savings banks, which will leave the government with a big bill down the road.
Analyst estimates of the amount of capital needed are less conservative then that of the government's. UBS AG estimates banks could need anywhere from €20 billion to €120 billion.
The Wall Street Journal
A business friend of mine who lives & works in Spain reckons that if the cajas and main banks in the country actually reflected, in their accounts, the true value, today, of the properties that they made bad loans on and/or have repossessed, things would be significantly more serious than they appear....still time yet!
Maybe it suits the EU to keep the cajas problems 'hidden'? :think:
In a first step, Spain is preparing to issue €3 billion ($4 billion) in debt in coming days, the people familiar with the matter said.
Government officials are putting plans in place to eventually raise as much as €30 billion, according to these people, though some say the final tally will be less.
The hope is that a series of capital injections will quell investor jitters about the savings banks, known as cajas (literally, "boxes"), which have been a thorn in Spain's side as it seeks to convince investors that the country's finances are stable.
Raising any new capital for the cajas carries risks, as it comes on top of Spain's existing financing needs. Economists estimate that the country needs to borrow €125 billion this year just to finance its deficit and roll over maturing debt.
Many of the cajas, which account for €1.3 trillion in assets—or 42% of total bank assets in Spain—used liberal lending practices to fuel a decade-long housing boom that went bust and left many of the institutions holding billions in bad loans and facing heavy losses.
Spain's government debt isn't that high compared to other troubled countries in the euro zone, such as Greece and Ireland. But borrowing costs for Spain soared at the end of last year after Ireland received a €67.5 billion bailout from the European Union and the International Monetary Fund.
After a successful bond issuance by Spain earlier this week costs have ebbed some. Nonetheless, investors worry that the authorities haven't come clean on the problems of the savings banks, which will leave the government with a big bill down the road.
Analyst estimates of the amount of capital needed are less conservative then that of the government's. UBS AG estimates banks could need anywhere from €20 billion to €120 billion.
The Wall Street Journal
A business friend of mine who lives & works in Spain reckons that if the cajas and main banks in the country actually reflected, in their accounts, the true value, today, of the properties that they made bad loans on and/or have repossessed, things would be significantly more serious than they appear....still time yet!
Maybe it suits the EU to keep the cajas problems 'hidden'? :think:
There is a pleasure in the pathless woods, There is a rapture on the lonely shore, There is society, where none intrudes, By the deep sea, and music in its roar: I love not man the less, but Nature more...
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Comments
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what amazes me is how did spanish banks manage to buy abbey uk?£48515 interest £181 (2009)debt/mortgage-MFIT/T2/T3
debt/mortgage free 28/11/14
vanguard shares index isa £1000
credit union £400
emergency fund£500
#81 save 2018£42000 -
Rodrigo Rato stepped down on Monday as chairman of ailing Spanish lender Bankia SA, helping to clear the way for a rescue plan that the government hopes will persuade international investors of the country's financial stability.
Rajoy did not mention Bankia, but two sources said the state will provide 7 billion to 10 billion euros in aid to the lender, which is saddled with toxic real estate assets that put it at the heart of concerns about the cost of a Spanish bank bailout.
Two government sources said state money would be injected into Bankia - an agglomeration of local savings banks or "cajas" - through the purchase of bonds known as CoCos, or contingent convertibles, that can be converted into shares.
Bankia is Spain's fourth biggest bank by assets and has already received more than 4 billion euros in government aid. Bankia and BFA are together the most exposed of any Spanish lender to troubled real estate assets, with 31.7 billion euros of exposure compared with a sector total of 184 billion euros.
ReutersThere is a pleasure in the pathless woods, There is a rapture on the lonely shore, There is society, where none intrudes, By the deep sea, and music in its roar: I love not man the less, but Nature more...0 -
The Spanish banks didn't buy Abbey, it was one Spanish bank - Santander.black_taxi wrote: »what amazes me is how did spanish banks manage to buy abbey uk?0 -
I think Spain allowed favourable tax treatment of foreign acquisitions hence the banks, O2 and BAA amongst other purchases. However how useful a tax credit is if you are not making any profits or can't roll over the funding is a moot point...I think....0
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black_taxi wrote: »what amazes me is how did spanish banks manage to buy abbey uk?
Santander "managed to buy" Abbey because Abbey was a publicly listed company which means that anyone can come along and buy it if they have enough money (well not quite simple as its a bank so you have to be cleared bu the fsa) to convince the current shareholders to sell their shares (it wasn't a building society by the time it was taken over).
The share price of abbey was quite low because it's strategy to change from a building society ended in disaster and it ran itself into the ground with a series of terrible strategic decisions. Therefore it was a fairly easy target for being taken over.0 -
Shares in recently nationalized Spanish bank Bankia tumbled 10 percent on Wednesday after it delayed first quarter results, raising fears the government will have to plough more cash into the struggling lender.
Bankia lies at the core of concerns about Spanish banks' problems after a 2008 property crash. Some believe Spain or Europe will have to inject funds into the sector to avert a collapse of the financial system, worsening the euro zone debt crisis.
"The problem right now is that nobody really knows what Bankia is worth and how much money the state is finally going to pump into Bankia. The uncertainty is absolute," a Madrid-based trader said.
MSN
BTW, Bankia is the largest shareholder (12.05%) in IAG Group, which owns British Airways.There is a pleasure in the pathless woods, There is a rapture on the lonely shore, There is society, where none intrudes, By the deep sea, and music in its roar: I love not man the less, but Nature more...0 -
Shares in Bankia have just been suspended after falling 28% today following reports of customers withdrawing funds of over 1 billion euros since nationalisation last week.There is a pleasure in the pathless woods, There is a rapture on the lonely shore, There is society, where none intrudes, By the deep sea, and music in its roar: I love not man the less, but Nature more...0
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worldtraveller wrote: »Shares in Bankia have just been suspended after falling 28% today following reports of customers withdrawing funds of over 1 billion euros since nationalisation last week.
It is normal for shares to be suspended after falling more than a certain amount to maintain an orderly market. Don't read too much into that bit.
I wouldn't be depositing any money with them though!0 -
Apparently the Spanish government is tonight poised to invest up to €19bn in Bankia, which would give the state around 90% control of the bank.There is a pleasure in the pathless woods, There is a rapture on the lonely shore, There is society, where none intrudes, By the deep sea, and music in its roar: I love not man the less, but Nature more...0
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worldtraveller wrote: »Apparently the Spanish government is tonight poised to invest up to €19bn in Bankia, which would give the state around 90% control of the bank.
Sounds like the rest of Europe is finally catching up with what the UK based banks did several years ago.
Events in Europe are doing little for Lloyds share price.0
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