9 January 2017 – Tribune
Hit by a severe crisis several years ago, Spain’s banking sector has recovered but at a cost as thousands are laid off and it struggles to get rid of toxic assets.
“The system is closer to putting most of the crisis legacies behind it,” said analysts at the International Monetary Fund in charge of Spain in a recent report. Still, the ghosts of a crisis that saw the European Union bail out the sector have recently been revived as Italy suffers a similar predicament, with the State having to rescue Monte dei Paschi di Siena, the world’s oldest bank.
The EU lent €41 billion ($43 billion) to rescue the Spanish banking sector in the spring of 2012, compared to some €50 billion in Greece, as an example.
At the time, Spain was waist-deep in a financial crisis caused when a property bubble burst in 2008, after years of euphoria that saw loans granted almost blindly to households incapable of reimbursing them.
Since then, though, the share of problem loans on the balance sheets of Spain’s banks has dropped considerably.
In the second quarter of 2016, it stood at an average of 6%, according to the European Banking Authority (EBA) regulatory agency. This is slightly above the European median of 5.4%, but well below that of Italy, Portugal or Greece, which stand at 16.4%, 20% and 47% respectively.
Spain’s central bank, which is even stricter in its calculations of the share of bad loans, said in November that it stood at an average of 9.2%, against a high of 13.6% at the end of 2013. The Moody’s ratings agency predicts this should continue to drop thanks to “favourable macroeconomic conditions” such as expected growth of 3.2% in 2016, double the eurozone average.
Banks are also much stricter in granting loans now.
But on a darker note, they are struggling to sell the huge amount of property seized during the crisis from households that could not pay, as buyers remain scarce.
“Despite the mild recovery in the housing market observed in 2015, banks’ real estate repossessions continue to exceed the volume of properties that banks are managing to sell,” said Moody’s in a note.
Original story: Tribune
Edited by: Carmel Drake