Spain walks in the right direction in the restructuring of its banking system, but it may not declare victory yet. This can be applied to the bad bank, as it is progressing but needs to revise its business plan in depth. The European Commission, the ECB, the rescue fund Mede and the European Banking Authority believe so. They all presented the second revision of the financial aid awarded to Spain by the Eurogroup. The IMF, independent consultant in this process, also shares this opinion.
The European authorities bless the steps taken to create the bad bank. “The Spanish authorities had to comply with a very demanding calendar and have succeeded in the design, the implementation and the methods of Sareb in time”, according to the statement issued yesterday. Also, the bad bank “has received the first and biggest transfer of assets from the nationalized institutions, such as Bankia, NCG Banco, Catalunya Banc and Banco de Valencia. These groups transferred around 89000 flats and 13 million square meters of land.
The IMF also highlights the “solid service agreements with the participating banks in order to manage the transferred assets.” Bankia has already started selling properties from Sareb.
Apart from this, it is vital “to establish political priorities” in order to fight all unresolved challenges, “such as completing a business plan which needs to be improved”, the Fund adds.
Brussels and Frankfurt establish that Sareb will only be successful if it is based on a “solid” and “up to date” business plan. It is therefore “highly important that the plan remains robust and believable based on the more up to date information”.
The institution presided over by Belen Romana has already started this process and has hired KPMG, who will redesign the business plan in two months, as advanced by Expansion. The first one was drafted by Frob, before the arrival of Romana and with the assessment of Alvarez & Marsal. Romana believes it needs to adapt to the real estate market reality and that it is necessary to prepare packages of assets to be commercialized among investors.
Europe and the IMF agree and stress that the updating is necessary as the previous plan was prepared with the figures included in the balance sheets of banks on the 31st December 2011. The information on the value of those assets and its current state is much more precise right now. Anyhow, the international institutions believe that the timeframe planning is one of the weaknesses of Sareb.
The revision of the EU and the IMF identifies other pending issues, such as the reform of the banking supervision and the savings banks regulation. The Fund urges the Bank of Spain to establish “specific calendars” which detail the proposal to make the supervision stricter.
The institution lead by Christine Lagarde is tougher on the draft of the savings banks law, in line with the troika. All agree that it is necessary to grant incentives to the old savings banks so that they hand over the control of the banks who took on their activity. The international institutions believe that the savings banks should gradually leave the financial sector and invest in other activities to compensate risks. This would also be the only chance to expel the politicians from the financial sector.