Significance and characteristics of burden-sharing in the recapitalization of Spanish banks
Fecha: mayo 2013
Autores: Daniel Manzano, A.F.I.
Etiquetas: Recapitalización bancaria, Burden-sharing
One of Spain’s commitments under the MoU signed with the EU for aid to the financial sector was to carry out a so-called burden-sharing exercise. Current estimates for the impact of the exercise point to a private sector contribution of nearly 13 billion euros, i.e., one fourth of the capital needs identified in the stress test performed under the MoU. Aside from its large scale, the process is also unique and technically complex, as a good deal of the affected hybrid instruments were placed among the retail customers of the institutions which need assistance. The FROB has set up burden-sharing guidelines for Group 1 and Group 2 banks. The ultimate impact of these measures on the nominal value of instruments for the holders of the securities in question will presumably be even greater than the stipulated haircuts, due to the mechanisms for exchange put in place to recapitalize banking institutions and the price levels to be set for the shares of the banks that are, or will be listed.