Cleaning up Spanish Bank Balances: restoring confidence, but is this enough?

Cleaning up Spanish Bank Balances: restoring confidence, but is this enough?

Fecha: marzo 2012

Autores: Ángel Berges

Etiquetas: Sistema bancario, Regulación financiera

Spanish and International Economic & Financial Otlook, SEFO, V. 1 N.º 0

Significant progress has been made on regulatory reform of the Spanish banking sector in particular with regards to consolidation, and improved corporate governance, and most recently, strengthening provisioning requirements on real estate related assets. Overall, the new provisioning requirements for impaired assets related to real estate exposure should be sufficient to account for the anticipated further decline of real estate prices. However, in our view, questions remain regarding the ability of banks’ balance sheets to withstand potential additional reclassifications of currently normally performing real estate assets as impaired assets – a scenario which could realistically materialize over the coming years. Moreover, we must also consider whether or not more coverage is needed on other types of bank portfolio assets, such as corporate and mortgage loans, whose quality could also be subject to deterioration in the face of the negative economic outlook.

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