28/10/2014 – Expansion
Spanish banks pass the ‘stress test’ by the European Central Bank (ECB) and the European Banking Authority (EBA), taken by the eurozone entities across the continent. The examination was failed by 25 out of 123 scrutinized banks, mostly located in Italy, Greece and Cyprus. When it comes to Spain, all fifteen entites were successful, with Liberbank showing a €32 million deficit in 2013 for which it has already intended €637 million. None of them showed need of capital.
The Bank of Spain’s Governor Luis María Linde assured the good marks were no coincidence as the State undertook meaningful measures to remove the toxic assets, cover the refinancing and obtaining the €50 billion European bail-out. Out of the supervised entities, BFA-Bankia, NCG (now Abanca), Catalunya Banc, BMN and Liberbank have received a direct support from the Government.
‘If marks were given, Spain would get the best one in the part of balance revision’, said Mr Linde. In fact, this country has shown the smallest adjustment in risky assets in Europe (0.2%).
All the entities preserve a wide margin in case of an adverse economic scenario, ranging from 5.5% to 8% and representing around €56 billion in total.
‘The banks have got a solid solvency position but no guarantee for the next 15-20 years’, warned the Governor. Fernando Restoy, vice-governor, added that the sector faces ‘not at all negligible challenges’ such as infavorable regulations and ‘flimsy’ economic circumstances which harm profitability.
In line with the cautiousness displayed above, the Bank of Spain would rather say the confidence and lending will return but not abruptly. The central entity also revealed that once the Asset Quality Review (AQR) is finished, the bank will welcome any activity leading to risk reduction.
Original article: Expansión (by M. Martínez & J. Zuloaga)
Translation: AURA REE