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pandora's box

Spain To Ramp Up Bailout Of Banks

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Spain will have to print its own euros, no doubt, as Ireland has had to do.

Spain plans to pour billions more euros into its troubled savings banks and force them to be more open about their lending practices, people familiar with the matter said, an acknowledgment that previous efforts to fix the banks have fallen flat as the country seeks to ward off an international bailout.

WSJ link

Edited by pandora's box

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Spain will have to print its own euros, no doubt, as Ireland has had to do.

WSJ link

sounds more like a bribe than a bailout....paid to be more open?

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It's all one big currency race to the bottom, and the only thing stopping the Spanish and Greeks taking the lead is that they are tied to Germany.

Everyone wants China to come last in devaluation race, but they have tied themselves to America.

Of course us Cunning Brits are like Mutley to Merin King's Dick Dastedly. Often throughout the race we get ahead of the other competitors, but instead of going on to win from our lead, we decide to stop and lay booby traps that then backfire on us.

Edited by Mikhail Liebenstein

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Spain will have to print its own euros, no doubt, as Ireland has had to do.

WSJ link

"Analyst estimates of the amount of capital needed are less conservative then that of the government's. UBS AG estimates banks could need anywhere from €20 billion to €120 billion."

In other words, it's anyone's guess really but we're definitely sure it's a lot of money.

Spain's GDP is about 1 trillion Euros, so even given a 120 billion Euro hole in the accounts, proportionate to GDP their banks' bad debts are nothing like as ruinous as Ireland's.

Edited by EvilEdna

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Spain will not need a bailout

Spain will not need a bailout

Spain will not need a bailout

Spain will not need a bailout

Spain will not need a bailout

Spain will not need a bailout

Ooops….Yes we do

Can we have 200 billion please asap.

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"Analyst estimates of the amount of capital needed are less conservative then that of the government's. UBS AG estimates banks could need anywhere from €20 billion to €120 billion."

In other words, it's anyone's guess really but we're definitely sure it's a lot of money.

Spain's GDP is about 1 trillion Euros, so even given a 120 billion Euro hole in the accounts, proportionate to GDP their banks' bad debts are nothing like as ruinous as Ireland's.

"€20 billion to €120 billion"

And us IT bods are accused of being vague in our estimates :blink:

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"Analyst estimates of the amount of capital needed are less conservative then that of the government's. UBS AG estimates banks could need anywhere from €20 billion to €120 billion."

In other words, it's anyone's guess really but we're definitely sure it's a lot of money.

Spain's GDP is about 1 trillion Euros, so even given a 120 billion Euro hole in the accounts, proportionate to GDP their banks' bad debts are nothing like as ruinous as Ireland's.

No 120bill is not the total amount of the bad debts it is the cash required to stabilise the situation (wishful thinking). When we did the recapitalisation of the banks here 80bill was injected and the worst case scenario was for the taxpayer to fund 800 billion of loses. So if the same 10 to 1 ratio is true in Spain then this means that the worst case scenario for spain is 1.2 billion of losses so 120% of GDP.

Spain are in exactly the same position as Ireland apart from having a larger Spanish owned multinational business sector which generates profits overseas and pays taxes so the govt has a stablish tax base. Whereas Ireland is a tax haven for non Irish multinaltionals who pay no tax there and decided that taxing house building and not income was the future and so has had a collapse in tax revenues.

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No 120bill is not the total amount of the bad debts it is the cash required to stabilise the situation (wishful thinking). When we did the recapitalisation of the banks here 80bill was injected and the worst case scenario was for the taxpayer to fund 800 billion of loses. So if the same 10 to 1 ratio is true in Spain then this means that the worst case scenario for spain is 1.2 billion of losses so 120% of GDP.

Spain are in exactly the same position as Ireland apart from having a larger Spanish owned multinational business sector which generates profits overseas and pays taxes so the govt has a stablish tax base. Whereas Ireland is a tax haven for non Irish multinaltionals who pay no tax there and decided that taxing house building and not income was the future and so has had a collapse in tax revenues.

yup, I cancelled my Santander "flexible-loan" account last year when they ramped up interest from 5% to 23% almost overnight...

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yup, I cancelled my Santander "flexible-loan" account last year when they ramped up interest from 5% to 23% almost overnight...

My link

When Spanish bank property losses go Irish

Posted by Joseph Cotterill on Jan 20 12:51.

At what point does Spain’s banking crisis look as bad as Ireland’s?

At what point do solutions to that crisis look as bad as Ireland’s?

Around about now:

Out of €439bn of total exposure to property, developers and construction (P&C) in Spain, €180bn are “Problem Exposure” according to Bank of Spain (adding together NPLs, substandard, plus repossessed and acquired assets). This implies a 41% effective “problem ratio”, which means that a lot of potential P&C defaults have already crystallised and been recognised in one way or another. However, we still expect the P&C “problem ratio” to increase substantially: we now estimate 60%. This assumption (which implies more than 80% default for pure developers) is the most bearish we have ever used, much worse than Bank of Spain’s assumptions, and similar to the Irish experience…

The numbers are by Arturio de Frias Marques, Evolution Securities banking analyst.

And to put them one way for UK readers, they look a lot like Lloyds’ eventual losses from its HBOS property loan book.

Hence, the latest future costs from property losses to Spain’s public banks: €19bn, according to Evolution. Manageable (in time) via provisioning on their own, perhaps.

Cost to Spain’s private caja banks: €65bn. Not manageable on their own. Not by a long shot. Hence, more liabilities for Spain’s sovereign.

Caja clean-up

Now, that gets us on to whether current proposals for fixing the cajas still look far too much like how Ireland tried to refund and fix its banks by itself. To summarise a giant mess — a combination of state guarantees for banks’ refinancing, bad-banking the worst assets, and hoping the eventual losses wouldn’t overwhelm either.

They did. But back to the cajas.

You’re probably going to hear a lot about further restructuring of the cajas in the coming weeks. They’re already supposed to have merged themselves into restructuring vehicles, SIPs (Sistema Institutional de Proteccion), to pool the bad assets together and make taking a capital hit from writing those assets down easier.

Problem is, the SIPs — grandiosely endowed with names like Jupiter, Mare Nostrum, Breogan — look more like half-mergers and they still lack a decent enough capital ratio (ideally, you’d want 10 per cent Tier One regulatory capital). Oh, and we’re waiting for full disclosure of their property loans at the end of this month.

(Breogan was a Celtic king of Galicia who may have led his people to migrate to Ireland. One helluva bad association to pick for European post-crisis banks, no?)

So, solutions?

Evolution reckon it means perhaps €25bn of recapitalisation via existing caja assets — and even that is plumped up with €10bn of previous state capital injections — leaving €40bn-€50bn to be found elsewhere. Now, they think this could be done via a combination of raising private capital and more state capital injections.

OK, but the problem is that Irish banks were supposed to restructure using refinancing on private markets. These attempts blew up when their loss exposure made funding prohibitively expensive. And if caja losses now look like Ireland…

How about those capital injections? Spain’s Fund for Orderly Bank Restructuring (FROB) raises money for this by issuing debt in the market as a sub-sovereign agency. If all €50bn is raised like this, Spain would have to issue 20 per cent more sovereign debt in 2011 and 2012, Evolution estimate. Not an impossible burden, but pretty difficult for Spain right now as it struggles to keep borrowing costs low.

Even so, it’s clearly being considered. And via the WSJ on Thursday:

Spain plans to pour billions more euros into its troubled savings banks…

In a first step, Spain is preparing to issue €3 billion ($4 billion) in debt in coming days… people familiar with the matter said. Government officials are putting plans in place to eventually raise as much as €30 billion, according to these people, though some say the final tally will be less.

For those interested in Irish comparisons, this bit sticks out:

Government officials are also weighing the possibility of setting up a government-administered “bad bank” for the toxic assets of some of the cajas, according to one of the people familiar with the matter, although it is unclear how that would be funded and structured.

El Nama del sol, anyone? The point being that Nama was another way Ireland transferred dodgy liabilities from one balance sheet (banks) to another (sovereigns), creating a grim feedback loop, especially as loan losses took forever to leak through.

It’s not particularly advisable for Spain, we’d suggest. Spain has a real chance to force cajas into upfront write-downs of the assets right now.

Furthermore, there are already concerns about contingent liabilities from its banks — we’ve already seen proposals to target funding from EFSF or IMF sources at Spanish bank recapitalisation.

Might they be worth a dust-off?

Especially because Evolution is counting on the bigger Spanish banks to absorb their smaller shares of these bearish loan losses over time, with steady provisioning. But this needs sustainable funding costs to work.

Which considering the non-property future loan losses also out there…

… and plenty of other funding negativity – seems a really tough bet.

Related links:

An €80bn mega-inyección for Spanish banks? - FT Alphaville

That extended España RMBS – FT Alphaville

Extensive (Irish) forebearance, what was it good for? – FT Alphaville

The Spanish (asset) elimination - FT Alphaville

This entry was posted by Joseph Cotterill on Thursday, January 20th, 2011 at 12:51 and is filed under Capital markets. Tagged with bad loans, cajas, frob, ireland, Irish banks, Nama, recapitalisation, sovereign risk, Spain, spanish banks, writedowns.

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yup, I cancelled my Santander "flexible-loan" account last year when they ramped up interest from 5% to 23% almost overnight...

Santander could be an excellent shorting opportunity as their loan book must be very impaired in both Spain and the UK. Plus where are they getting their short term funding from? What are their proven reserves? Their real estate losses in Spain haven't been realised yet, so that's going to hurt. No doubt an Iberian version of Broon and Mystic Merv will pop up to 'save the world' and recapitalise Santander to the tune of more than their entire GDP whilst giving out billions to banksters in bonuses. It's the Anglo rule book dontcha know, much beloved by HPC.

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  • 312 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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