Spain is still accounting for the banking rescue conditions agreed with Brussels this summer. Europe has drawn lines on the restructuring of the sector (…).The Bank of Spain has asked all institutions to carry out a deep revision of their recovery and damaged assets management policies. Banks have two months to send the information to the supervisor.
After five years of financial and economic crisis, Spanish banks have approximately 300.000 million Euros in non profit assets, according to November figures. There are unpaid credits, most of them linked to the real estate sector, for nearly 200.000 million Euros, and an amount of loans still to be quantified with a risk of default. Additionally, the sector accumulates 100.000 million Euros in awarded properties. A percentage of these assets are no longer a burden for the feeble institutions, who have transferred a part of their credits and problematic properties to the bad bank.
(…) The banking sector has four months to implement the agreed measures. “This will allow the Bank of Spain to identify the unsatisfactory management systems and carry out inspections in banks”, Brussels indicates.
This internal audit will also determine if the institutions are ready to handle a high increase of the default payments. Currently it has reached 11,5%.
The same sources determine that there is the intention of avoiding the same scenarios experienced in Ireland after the rescue. The default payments boosted, especially in the individuals segment, collapsing all recovery departments, with an insufficient infrastructure.
In the past year (partly obliged by regulatory demands) the sector has increased its efforts in the management of the damaged assets, especially real estate ones. Fitch insisted yesterday that the developer´s risk continues to be the biggest weakness of Spanish banks. This year, nevertheless, the economic crisis will continue damaging other portfolios.
Once all credits and properties have been covered, the key is to get rid of them as soon as possible. Those banks which have already published their results have shown in the last few days that one of their priorities now is the disinvestment of damaged assets, among them, the real estate ones.
The messages of the institutions anticipate an increase in the sale of properties in 2013, together with the entrance of Sareb in the market. Banks are even looking into the creation of internal bad banks to optimize their management.