Regular readers know this is not surprising as it is a continuation of the Japanese model and its policy of protecting bank book capital levels and therefore banker bonuses at all cost.
Spain should seek European money to rescue its failed lenders, said Banco Santander SA Chairman Emilio Botin, joining a growing number of bankers who question whether the government can manage the task on its own.
Botin, the 77-year-old head of Spain’s biggest bank, said 40 billion euros ($50 billion) in European Union funds for nationalized banks, including the Bankia group, would be enough to resolve the industry’s crisis. Banco Sabadell (SAB) SA Chairman Josep Oliu has said EU funds for weaker lenders “could be a solution,” while Bankinter SA (BKT) Chief Executive Officer Maria Dolores Dancausa said Spain may have no choice.
“Using the mechanisms for assistance from Europe or the IMF is the best option and more and more the banking industry is taking that view,” said Juan Carlos Ureta, chairman of Renta 4 Banco SA, a Spanish bank and investment services company. “There is the risk of a possible stigma and that is why it’s so important to stress that it’s only some institutions that are in difficulties while the industry as a whole is healthy.”First, Spain has a modern banking system which includes deposit guarantees and access to central banking funding. As a result, there is no need for the Spanish government to inject funds into any bank as the bank can continue to operate for years and support the real economy while it rebuilds its book capital levels through retention of future earnings.
Second, the EU and especially Germany should make all Spanish banks providing ultra transparency a condition of any economic assistance to the government or the banks. Without ultra transparency under which the banks disclose their current asset, liability and off-balance sheet exposure details, how does anyone know the total amount of losses hidden in the Spanish banking system and if there is a healthy Spanish bank.
Spain moved to center stage in Europe’s debt crisis after last month’s nationalization of the Bankia group. The Madrid- based lender’s request for 19 billion euros to mend its balance sheet underlined banks’ mounting losses and the strains on the state’s ability to absorb them.
Steen Jakobsen, chief economist at Saxo Bank A/S, said it’s unrealistic for Spain to accept aid for the banks without also seeking a rescue to cover the financing needs of the government and its regions.
“Spain’s problems are multi-dimensional, from having to deal with real estate to fixing the budget deficit and all at the same time,” said Jakobsen. “The idea that you can solve the situation with 40 billion euros of European money for the banks makes no sense.”...
More Spanish banks are in favor of seeking European funds for ailing lenders because neither the banking system nor the government can afford to absorb the losses, said Ureta....
“As far as the healthy banks go, there aren’t too many of us,” said Sabadell’s Oliu in comments provided by the lender...I assume that Sabadell's Oliu will be more than happy to provide ultra transparency and let the market confirm Sabadell's health.