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Spain Orders Banks To Come Clean On Debts To Restore Shattered Faith

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http://www.telegraph.co.uk/finance/financetopics/financialcrisis/7773427/Spain-orders-banks-to-come-clean-on-debts-to-restore-shattered-faith.html

The Bank of Spain has ordered the country's lenders to face up to bad debts and set aside reserves of up to 30pc on property holdings in a bid to restore global confidence in the Spanish financial system after weeks of investor flight.

The new rules target the savings banks or cajas that account for the lion's share of the €445bn (£377bn) of property debt accumulated during the credit boom, when real interest rates were negative.

The authorities acted after severe strains in the inter-bank market had begun to raise questions about the ability of Spanish lenders to access routine funds from global peers. Deutsche Bank said Spanish lenders need to refinance €125bn by late 2011. "Liquidity is our main area of concern. Savings banks are in a very weak and risky position," it said.

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.

No Spanish bank has raised money on the capital markets for a month. They are relying on the European Central Bank's lifeline. ECB funding has reached €89bn, the highest level since the Lehman Brothers crisis.

The new rules will force lenders to write down bad debts within a year instead of stretching out the pain for up to six years. They must set aside reserves on €60bn of foreclosed property still sitting on their books at face value, using a rising scale of up to 30pc. Santander and BBVA have already done this.

"Spanish accounting was completely out of line with the rest of Europe," said Hans Redeker, currency chief at BNP Paribas. "It had reached a point where investors no longer believed in Spanish balance sheets because equity ratios are distorted by overvalued holdings of real estate. This move was absolutely the right thing to do. You can't camouflage bad debts any longer. Those days are over," he said.

The Bank of Spain risks opening a Pandora's Box since nobody knows how many cajas are insolvent once loans are marked-to-market. Last weekend it seized CajaSur, a 150 year-old lender in Cordoba controlled by the Catholic Church. The lender lost €596m last year, much of it on holiday homes on the Costa del Sol.

The regulator said the measures would cut bank earnings by 10pc on average but warned of a "very heterogeneous" effect, a polite way of saying that it will purge cajas that ran amok. The crackdown will bring matters to a head rapidly, forcing cajas to disgorge property holdings onto the market. This is a gamble, risking a house-price crash that could tip Spain deeper into debt deflation.

Caixa Catalunya said the stock of unsold homes reached 926,000 last year. Madrid consultants RR de Acuña are gloomier, saying buildings in the pipeline will push the overhang to 1.6m and will take six years to clear. New home starts have fallen 90pc from their peak in 2007.

Santiago Lopez from Credit Suisse said the new rules may prove "the last straw" for weak cajas but praised the central bank for "finally deciding to get tough".

He said the non-performing loan rate in Spain is 5.33pc but past interventions by the central bank revealed "dramatic" rises in NPL ratios after a fresh audit. Once the full truth comes out on CajaSur we will know how bad the picture is for others.

Mr Lopez said Spain's Achilles Heel is private debt of 211pc of GDP. This is much like Britain (213pc), but takes places in the very different context of deflation. Spain cannot easly grow its way out of the crisis because it is structurally overvalued within the EMU.

Still its a sensually contained recovery that's enabling the structurally sound to restructure to further strengthen their asset position.

Debt is wealth.

How long before the markets turn on Spain like they did with Greece?

Just think Spain is having to help bailout Greece...

Still no need to worry, we just need more debt to solve this debt crisis.

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"Spanish accounting was completely out of line with the rest of Europe," said Hans Redeker, currency chief at BNP Paribas. "It had reached a point where investors no longer believed in Spanish balance sheets because equity ratios are distorted by overvalued holdings of real estate. This move was absolutely the right thing to do. You can't camouflage bad debts any longer. Those days are over," he said.

That is the funniest statement. As far as I know BNP's books still show Lehman bonds at face value.

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Yes, I'm all in favour of this but it does rather let the cat out of the bag - and is that what people really want?

If all banks were to value their assets on anything near a reasonable basis it wouldn't surprise me if the vast majority were insolvent. Most countries have rules on insolvency that say that you can't continue to trade if you are insolvent - so where do we go from there? I happen to think that the vast majority of banks are indeed insolvent but there's only so much bad news that people can take.

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Yes, I'm all in favour of this but it does rather let the cat out of the bag - and is that what people really want?

If all banks were to value their assets on anything near a reasonable basis it wouldn't surprise me if the vast majority were insolvent. Most countries have rules on insolvency that say that you can't continue to trade if you are insolvent - so where do we go from there? I happen to think that the vast majority of banks are indeed insolvent but there's only so much bad news that people can take.

The situation is what it is. Choosing not to face up to facts does not change the facts.

All there is, is the truth.

This is mildely profound for me on a Friday morning. I'm off for a dump.

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Jesus Spain are fecked royally.

This bit in particular:

"The new rules will force lenders to write down bad debts within a year instead of stretching out the pain for up to six years. "

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Germany: bad bank

Ireland: bad bank

Spain: real, no BS mark-to-market ? :blink:

When Spain goes greek,,,,, it's going be,,,,,, 1 Euro = 1 Doller*

* sorry, I just had a BXLONDONMAN moment :D

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Mmm... Perhaps I should consider transferring the few thousand pounds I have with Santander to Tesco Bank.

It's not that the money isn't safe - it's the hassle one has to go through to recover it if the bank goes down. Looking up Tesco on Wiki I noticed the have bought out the other half from that Scottish train crash (RBS).

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It looks like they're trying to cauterise the wound and sacrifice their cajas and housing market.

One doesn't have to look far to see where the pressure for this is coming from.

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.

Merkin doesn't care what happens to the Greeks, Spaniards etc that her banksters recklessly lent to. She's trying to protect Herman. F*ck everyone else.

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[

Still its a sensually contained recovery that's enabling the structurally sound to restructure to further strengthen their asset position.

Debt is wealth.

How long before the markets turn on Spain like they did with Greece?

Just think Spain is having to help bailout Greece...

Still no need to worry, we just need more debt to solve this debt crisis.

What exactly does all that jibberish nonsense actually mean?

You do it in every one of your posts. Stop embarrassing yourself.

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This bit in particular:

"The new rules will force lenders to write down bad debts within a year instead of stretching out the pain for up to six years. "

Its not just bad debts, Spanish banks have massive holdings of property. They are valued at the value of the loans.

They will write the property down to the Spanish government values, not what they would be worth if they attempted to actually sell them. Spain has a system of the government and banks colluding to prop up property values, the whole country is a scam.

Oh, and they tax you on their valuations when you buy and sell - not the actual selling price.

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What exactly does all that jibberish nonsense actually mean?

You do it in every one of your posts. Stop embarrassing yourself.

Not quite sure what is it your finding hard to understand so I'll try and translate as best I can:

Still its a sensually contained recovery that's enabling the structurally sound to restructure to further strengthen their asset position.

Consensual

You see the banking sector is structurally sound which means they clearly need to restructure to ensure they remain structurally solvent by ensuring their assets are worth at least 3 times what say they are making themselves very rich.

Debt is wealth.

Translation - Wealth is debt

How long before the markets turn on Spain like they did with Greece?

Translation - How long before the markets turn on Spain like they did with Greece?

Just think Spain is having to help bailout Greece...

Spain is having to issue more govt debt to fund the Greek bailout, considering the strength of the Spanish fiscal position this clearly makes economic sense, which is why they are having an austerity budget resulting in civil servants having their wages cut.

Still no need to worry, we just need more debt to solve this debt crisis.

Again see above, the Europeans are solving the debt crisis by issuing more debt.

Have you looked down the back of the sofa? When did you have it last?

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http://www.telegraph.co.uk/finance/financetopics/financialcrisis/7773427/Spain-orders-banks-to-come-clean-on-debts-to-restore-shattered-faith.html

Still its a sensually contained recovery that's enabling the structurally sound to restructure to further strengthen their asset position.

Debt is wealth.

How long before the markets turn on Spain like they did with Greece?

Just think Spain is having to help bailout Greece...

Still no need to worry, we just need more debt to solve this debt crisis.

The article rightly points out how worrying it is that spanish bansk still have bloated balance sheets and have not marked to market.... I suspect spain is not alone and other banks in other euro countries have the same issue.... for spain it is doubly worrying of course becaseu of the housing exposure... but where other euro institutions have lent to spanish banks which then mark to market... further issues emerge as those bansk should be also marking down their own debt as its recovery begins to come into some doubt.

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Meanwhile, back at the ranch...

More Spanish Saving Bank "Cold Fusions" - La Caixa In Merger Talks With Caixa Girona

The shadow bailout of the weak(est) Spanish banks continues under the guise of a forced national M&A program, as banks with some toxic asset capacity "merge" with the worse ones. Today's first "cold fusion" casualty is savings Caixa Girona which was merged by Barcelona's massive (in size if not solvency) La Caixa. With the recent change in requirements for loan loss provisioning by the Spanish Central Banks, which will make balance sheets far weaker, we will be bringing you many more such merger news going forward.

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That is the funniest statement. As far as I know BNP's books still show Lehman bonds at face value.

You are joking right? :o

Right? :ph34r:

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Fitch downgrades Spain's credit rating.

Linky

This recovery is looking stronger and stronger as the months go by.

“If you tell a lie big enough and keep repeating it, people will eventually come to believe it. The lie can be maintained only for such time as the State can shield the people from the political, economic and/or military consequences of the lie. It thus becomes vitally important for the State to use all of its powers to repress dissent, for the truth is the mortal enemy of the lie, and thus by extension, the truth is the greatest enemy of the State.”

Goebbels

It would appear that the truth can't be hidden for much longer.

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  • 140 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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