The reform of the Spanish financial system follows its due course. The European Commission, the European Central Bank (ECB) and the International Monetary Fund (IMF) certified yesterday that the Government has complied in record time with nearly all conditions required in exchange with the 41.500 million Euros to restructure the Spanish banking system. Nevertheless, the troika found several “challenges”, which is the euphemism used to avoid the word “problem”. The most challenging part is the one referring to the Sareb or bad bank.
Both in the report published by the Commission and the ECB and in the one published by the IMF (who participates in the program as a counselor), they certify that the original business plan is now obsolete and that it is urgent to finalize a new one, as it is currently being done by KPMG. On the other side, Brussels warns that there is still a lot of work to do and that “the next months need to be devoted to making Sareb a fully operative institution. […] A solid business plan should be the base for the success of Sareb, and therefore it is very important that it remains robust and credible”, the document declares.
The IMF assures that the next steps for Sareb should include the approval of its long-term business plan, the final establishment of its organic structure and the hiring of staff. The institution led by Christine Lagarde assured that the bad bank should prioritize this strategy instead of looking for new capital, as the entrance of new shareholders would be done at better valuation levels: “To close new capital contributions at this early stage of the development of Sareb could have more costs than benefits, especially if it means offering costly incentives or if the new contributions simply reduce the investments of the current investors and do not widen the capital base”. (…)
Among the main “challenges” to be confronted by Sareb, the IMF stresses out the operational ones (“the size of Sareb, with the 145.000 assets transferred by the Group 1 banks make the management of the assets complex”) and the financial ones: “the value of the assets of Sareb depends on the macroeconomic developments”… Nevertheless, the IMF recognizes that the bad bank has a cushion: the transfer prices of the assets were similar to the prices of the unfavorable scenario of the stress test.
Both the Commission and the IMF stress the importance of aligning the interests of the shareholding banks and Sareb, as these institutions are also selling the portfolio of assets. (…)