According to a Telegraph article, Madrid focused on maintaining the facade that its banks are solvent.
Why? Everyone knows that its banks are insolvent as loans to not just property developers, but consumers (mortgages) and businesses have gone bad?
Madrid ordered its key financial institutions to raise provisions against toxic property loans from 7pc to 30pc, as part of its fourth attempt to shore up the stricken sector since the Spanish property bubble burst.
Banks, many of which are still struggling to implement the last €54bn (£43.4bn) recapitalisation programme ordered in December, have also been told to separate their real-estate loans from the rest of their assets in a further effort to ring-fence the problem area.
The move will provide an extra €30bn cash cushion to ward against tumbling property prices. The measures will take total provisions against real estate assets to €137bn (£110bn) or 45pc of the banks' portfolios. The government is expected to guarantee the loans above this level.
Banks that fail to raise the additional capital - or submit plans within 15 days of how they intend to do so - will be forced to accept government loans in the form of convertible bonds that would charge interest at a rate of 10pc a year.
By injecting funds as debt, the investment bankers believe you can fool the market into believing that it will not cost the Spanish taxpayer any money (remember: the government is borrowing at 6%).
Madrid has also conceded to demands from the European Commission to allow an independent audit of its banks.
Ministers told reporters that the banks will be scrutinised by two separate auditing firms, who will determine the value of their property portfolios.
Mariano Rajoy, Spain's prime minister, is said to have accepted the audit in the hope that they will at least provide a degree of certainty for the markets from which confidence can start to be rebuilt....Ireland tried this twice. Nobody believes the results of these independent auditors.
Luis de Guindos, Spain's finance minister, said: "It is imperative to take measures to ensure solvency, and the government has made today the appointment of two entities to value the loan portfolio of banks in Spain." He added: "Without certainty about the solvency of the banking sector, economic recovery is much more difficult."Spoken like a former investment banker (which he is).
There is certainty about the solvency of the banking sector. It is insolvent.
What there is not certainty about is the value of the assets that are tied up in the bank's ongoing extend and pretend activities. It is this uncertainty that makes economic recovery more difficult.
A different Telegraph article included the following
"The government wants complete transparency, clarity is crucial to end any doubt about Spain's solvency," Economy Minister Luis de Guindos told the conference.If the government truly wanted complete transparency, it would require the banks to provide ultra transparency.
Instead, the government is following in Ireland's path of playing for time and hiding how bad the situation really is. The only winners from this policy are the bankers. They keep collecting their bonuses.