In his inauguration speech, the next Prime Minister, Mariano Rajoy, has made clear that the restructuring of the financial system will be a priority, since it is necessary to get credit flowing again to the productive economy.
Rajoy said that uncertainties remain about the actual health of Spanish banks' balance sheets, which impairs the access of international financing institutions and, consequently, blocks credit.
Therefore, the new government will promote the cleaning up of balance sheets. It will force banks to sell properties that have been terminated as a result of debt swaps or attachments. In many cases, banks and savings banks are delaying the sale of these properties to avoid taking losses by having to sell cheaper than they bought.
In addition, Rajoy has insisted that banks and building societies will have to give a proper assessment of their illiquid assets, i.e. the soil to be valued in balance with the actual market price.
This process obviously requires entities to recognize all unrealized losses, which will bring more capital requirements. To cover, as Rajoy, will have to start a new wave of consolidation "more mergers and a change in the banking map, with fewer, stronger entities," he said.
The PP leader's words seem to remove the possibility that the Government chooses to clean up the financial system through a public bad bank, in which institutions dip their toxic assets. Although uncertainties remain, it seems that commitment to the model Rajoy has defended the big banks (Santander, BBVA and CaixaBank): public aid only to entities that need it and, above all, subject to mergers.
Rajoy is expected that the restructuring process should focus on the first six months of next year and believes that is a prerequisite for the credit flowing again.
A stronger regulatory
The next Board also wants to strengthen the role of the Bank of Spain, to streamline decision-making and avoid delays, said Rajoy. A phrase that has rung as a reproach to the current governor Miguel Angel Fernandez Ordonez, who has been accused of unnecessarily delay in the restructuring of the sector.
( This post is a direct translation from Expansion.com)
Final note by María de Castro:
Then Spanish Banks could also start triyng to ask for liabilities before European banks.
Read Paul De Grauwe´s THE ARTICLE again for a full picture of the situation and why Spain reached that point of overcredit and overexposure to brick.
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"Navidad en la Plaza Mayor de Valladolid", Spain, by rodcasro, at flickr.com