Recent progress on bank restructuring and recapitalization in Spain

Recent progress on bank restructuring and recapitalization in Spain

Fecha: mayo 2013

Autores: Santiago Carbó Valverde, Francisco Rodríguez Fernández

Etiquetas: Reestructuración bancaria, Recapitalización bancaria

Spanish and International Economic & Financial Otlook, SEFO, V. 2 N.º 3

Over the period from March to May 2013, Spain has taken key actions in several areas as stipulated by the MoU with the EU, including: i) the restructuring and recapitalization of nationalized banks, complete with burden-sharing mechanisms for Group 1 and Group 2 banks; ii) the establishment of guidelines for reclassification of loans; and, iii) the approval of an updated business plan for the SAREB, which aims at selling almost half of the assets transferred by banks in 5 years. As for the burden-sharing mechanisms, the Steering Committee of the FROB has approved haircuts on preferred stock and subordinated debt of Group 1 and Group 2 banks with a range from 13% to 60%. In the case of loan reclassifications, the actions are expected to have potential impact on provisioning requirements, and as a consequence, credit conditions. The Bank of Spain has informed that there are 208.21 billion euros in refinanced and rescheduled loans and 45.7 billion euros correspond to doubtful loans, which are not covered by provisions. In the case of actions related to the SAREB, these will likely influence housing prices, banks’ real estate exposure, as well as their general balance sheet health. The success of the SAREB will be a large determinant of whether or not the government will be able to resolve the banking crisis overall.

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