Friday, May 28, 2010
Scary stuff
Telegraph: Spain orders banks to come clean on debts to restore shattered faith
Even the strongest banks – Santander and BBVA – are paying a stiff premium over Libor. The Wall Street Journal reports that BBVA has been unable to roll over €1bn in commercial paper. This has raised fears of a chain reaction through Europe's banks due to the nexus of loans. Data from the Bank for International Settlements show that European banks – led by German lenders, in some trouble themselves – have $851bn (£584bn) in exposure to Spain, as well as $240bn to Portugal and $189bn to Greece.
The Bank of Spain risks opening a Pandora's Box since nobody knows how many cajas are insolvent
Posted by mark @ 11:57 AM (1134 views) Add Comment
12 Comments
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1. paul said...
Yeees. In the UK and US we tried that a few years ago and it didn't work.
2. Fletch said...
In Spain 860,000 housing starts took place in 2006. Two-thirds of the housing units builtin Europe between 1999 and 2007 were built in Spain, despite the disproportionatley smaller Population. By the end of the construction boom (end 2008), the stock of loans to real estate developers and builders reached almost 500 billion euros, which is equivalent to half of Spain’s GDP.
So half Spain's GDP was tied up in Property, without that leg to the stool what happens today is key.. SPAIN Parliament votes today to approve government austerity plans announced two weeks ago..it's already being called as a close vote and many already saying they have to dig far deeper to combat issues.
SPAIN BANKING SECTOR: Bank of Spain confirms June 30 as deadline for the savings banks (Cajas) to access FROB restructuring funds. Local press points to an extension to that deadline.
3. mrmickey said...
Bit like hitting an unexploded bomb with a hammer, not recommended.
4. gone-to-colombia said...
Yes, such a large bomb that the explosion will rock through Europe and beyond
5. str 2007 said...
I find it incredible how well prices are holding up in Spain if they had that many starts in 2006.
Unfortunately Spain doesn't really appeal to me, but never say never.
6. enuii said...
If I remember rightly Spanish banks book the value of the property on their books at it's original valuation as their accountanccy rules are somewhat different to the UK's.
Accordingly they do not need to declare them on their balance sheet at a reduced (or increased value) until it is realised i.e. the property (if repossessed) is sold.
As has been stated earlier a large UXB waiting to go off.
7. jack c said...
Santander are fine - I've seen their advertsiments on TV - all is well, you've go to believe them
8. uncle tom said...
The numbers just don't stack in Spain - as I've been saying for a long time now..
..they are awash with vacant property, yet there is a continuing pretence that property values are vastly above construction cost.
I can only assume that there is (or has been) a broad conspiracy amongst the banks to not let repo property be sold off cheaply, thereby maintaining the illusion that their loans are covered by assets.
Yet in the absence of a massive inward migration to take up the slack, or a state funded program to buy and demolish (which the state cannot afford..) it seems inevitable that market forces will prevail, with the result that almost all of Spain's banks (including Santander) will likely become insolvent.
Quite how the Spanish govt will attempt to handle thus crisis remains to be seen, but my Re-captcha for this post - be lenders - seems most unwise!
9. stillthinking said...
This has come up before, the Spanish banks were fingered ages ago.
The reason this hasn't yet resulted in a dramatic housing price collapse is, as far as I know, because under Spanish law the banks are not allowed to repossess and sell at a value below the outstanding loan. So there are no repossessed properties being sold off -at all-, because none of the properties can be sold for more than the outstanding loan.
You do have to wonder how this works in the end, because the depositors, who essentially hold a claim on a debt that won't be repaid, are free to transfer this money abroad. They are free to transfer the obligation to Canadian dollars for example. Hence the shock and awe announcement to make up the various losses from the European taxpayer. Is it enough?
10. titaniccaptain said...
@Uncle Tom
"I can only assume that there is (or has been) a broad conspiracy amongst the banks to not let repo property be sold off cheaply, thereby maintaining the illusion that their loans are covered by assets."..........
You may be able to apply that notion to the lenders here in the UK.....i.e. Halifax and Nationwide.
Maybe or maybe not.....but food for thought.
11. titaniccaptain said...
@Uncle Tom
"I can only assume that there is (or has been) a broad conspiracy amongst the banks to not let repo property be sold off cheaply, thereby maintaining the illusion that their loans are covered by assets."..........
You may be able to apply that notion to the lenders here in the UK.....i.e. Halifax and Nationwide.
Maybe or maybe not.....but food for thought.
12. titaniccaptain said...
I've had a guts full of these ReCapturds.......