Tag: European bad bank

Popular Abandons Sunrise To Pursue Other RE Solutions

29 March 2017 – Cinco Días

Speculation about the future of Banco Popular has not dissipated following Emilio Saracho’s arrival as the entity’s new President on 20 February, although it is true that it has tempered slightly. The bank’s low solvency ratios, after it completed a major cleanup effort in 2016, are fueling those rumours and it seems that until the entity shows the market that it is capable of resurrecting itself like Ave Fénix, through some kind of major sales operation, then the market will not stop seeing it as an easy target.

Popular’s level of regulatory capital stood at 8.17% in December, below the 10.5% required by the ECB in January 2019 and also below the average for the sector. Most of its capital consumption is due to its high-risk level, itself a consequence of its large property portfolio, the main problem in all of this. However, a substantial number of the solutions designed by the former President, Ángel Ron, have now disappeared or have been modified. (…)

One project that has been buried almost completely, although it has barely been acknowledged that it is not going to be carried out, is Sunrise. That was Ron’s star project, to eliminate a large part of the entity’s real estate portfolio.

The idea was to transfer around €6,000 million in real estate assets to this vehicle, which was going to be deconsolidated from Banco Popular’s balance sheet, after securing a complex financing structure, and its subsequent debut on the stock market.

It seems that Saracho has not approved of that project since he arrived at the bank and has decided to shut it away in a drawer, never opened. Now questions are being asked about what will happen to Remigio Iglesias and Roberto Rey, two executives hired by Popular last year to serve as the President and CEO of Sunrise, respectively.

Another option still open to Popular is to turn to the European bad bank, which the ECB is expected to create, according to market sources. In fact, Popular’s share price was the most bullish on Tuesday, with an increase of 3.24%, after the European Banking Authority said that it was in favour of creating a European bad bank to solve the problematic loan phenomenon, a project that is also supported by the ECB.

Original story: Cinco Días (by Ángeles Gonzalo Alconada)

Translation: Carmel Drake

Sareb Supports EBA’s Proposal To Create EU Bad Bank

7 February 2017 – Cinco Días

Last week, the European Banking Authority proposed the creation of a continent-wide bad bank and that initiative has now been approved by the European Central Bank. Brussels can also count on support from Spain, a country that, to a certain extent, has become an essential reference point following the rescue of the Spanish banking sector and the creation of Sareb, the national bad bank.

“The EBA’s proposals echo a lot of our experiences, as well as the lessons learned during the process”, says Íker Beraza (pictured above), Deputy General Director of Finance at Sareb (…).

Sareb allowed Spain’s banks to free themselves from non-performing loans amounting to €50,700 million. It is hoped that this will able to be replicated on a European scale. In Italy alone, NPLs amount to €276,000 million, and in France and Spain, the volume still amounts to more than €140,000 million. In total, Europe’s banks have more than €1 billion in doubtful loans.

The definitive clean up of these balance sheets has become an obsession in Brussels in recent months. And the plans to find the most appropriate way of doing this are accelerating. (…).

A working group between the 28 EU member countries, operating under the chairmanship of the French Treasury, has been debating for six months regarding possible solutions for putting an end to the crisis that is weakening the financial sector, reducing the availability of credit and hampering growth.

Like in previous phases of the crisis, the heated dispute between countries in the north and south is reducing the chances of reaching an agreement. But an air of urgency is starting to dominate and the EBA’s proposal has brought to light buried contracts, with the possibility of transferring up to €250,000 million in non-performing loans to the European bad bank.

Last Friday, high profile representatives from the European Commission, the ECB, central banks and Treasuries, attended a seminar, behind closed doors, regarding “the crisis of the non-performing loans”, organised in Brussels by the Bruegel study centre.

Beraza attended, on behalf of Sareb, as one of the most prominent speakers. “The EBA’s proposal is interesting and we can share important lessons that we have learnt since 2012”, said Beraza.

Beraza said that experience in Spain is proof that “the transfer of assets is a very efficient tool and that in Spain, to date, it has worked out 20 times cheaper than recapitalisation”.

Sareb’s Director considers that the creation of a similar entity on the European scale “would give the system the robustness it needs to handle crises, which have been shown themselves to be almost always systemic, as well as contagious from one country to the next”.

Sources at the European Commission say that the initiative could begin with a first step based on coordination between the national bad banks. The ECB is also keen to establish a common model upfront for the creation of all national banks in the Eurozone.

Moreover, the EBA’s proposal rules out the mutualisation of the potential losses of the European bad bank, which would be borne by the national authorities. This safeguard was introduced to stop Berlin from vetoing the project. (…).

“It is clear”, said Beraza, “that the bad bank model is here to stay in Europe, as an effective tool to be used in the time of crisis”.

Original story: Cinco Días (by Bernardo de Miguel)

Translation: Carmel Drake