Linde estimates that the uncovered refinanced credits reach 88.300 million Euros.

The Bank of Spain quantified yesterday, for the first time, the volume of the refinanced portfolio of Spanish banks: 208.206 million Euros, 13,6% of the awarded credits. Four years after the supervisor provided the only existing official figure until now (in 2009, the Bank of Spain declared that the volume of properties and renegotiated loans was equivalent to 2,4% of the balance of the sector), the regulator publishes the in-depth analysis of a portfolio that has been in the center of public attention since the crisis started.

Following the guidelines of Brussels, the Bank of Spain introduced last summer new information requirements on restructuring processes, which have been complemented with the hardening of the criteria on refinancing announced last week. This strategy, more transparency and less provisions, is the same that was applied to reduce the doubts of investors on the greatest weakness of banks: the real estate exposure. In this occasion, however, a lower impact on provisions is expected.

Out of the 208.000 million Euros in refinanced credits, 37% (77.000 million Euros) are loans classified as doubtful, with a coverage of 40,6%. Another 42.900 million Euros (20,6%) are recorded as substandard  loans or with a risk of default. Their coverage reaches 18,4%. The remaining 88.300 million Euros are loans to families and companies with financial difficulties that are classified as being up-to-date (normal risk) and with no specific coverage.

In –less frequent- situations where the real economy experiences two consecutive recession processes, a part of the refinanced operations can become doubtful”, the regulator declares in his last Financial Stability Report. “This is why, transparency is given a growing importance on the international level, providing the market with policies and data on these operations”, he points out.

The stress test carried out last summer by Oliver Wyman on Spanish banks in order to calculate their capital needs was also an unprecedented example of public information. The delay of the Spanish economy in leaving the recession behind has suggested that the sector might be in need of additional capital. The supervisor, however, stresses that the conclusions of the test are still valid. The real rate of default in 2012 has been lower than expected in the test and, on the contrary, the result before provisions of banks has been better than expected (20.000 million Euros opposite to the gap between 14.000 and 16.000 million Euros planned in the test). Should the new macroeconomic plans for Spain until 2014 be applied, the probability of default of the portfolios (a key factor to calculate the losses) would be higher than the ones foreseen in the most optimistic scenario of the test, but would be far from the most extreme hypothesis.

On the other hand, the supervisor confirms the general fall of credit, of -7,1% in March. The acceptance rate of loans to companies has dropped from 45% to 30% since 2006. The cuts have been more profound in nationalized banks “due to the more difficult financial situation suffered in the last few years”.

32