Tag: Luis María Linde

Bank Of Spain Puts Pressure On Banks To Accelerate Property Sales

7 September 2016 – Cinco Días

The Bank of Spain wants Spain’s financial institutions to speed up the sale of their foreclosed assets and get rid of their toxic assets as soon as possible. The supervisor has been unmoved by the banks’ requests to relax some of the interpretations of the accounting circular 4/2016, which comes into force in October, governing their provisions against properties. The banks still hold more than €84,000 million of foreclosed assets.

Spain’s banks are finalising the figures for the new provisions that they will have to make following the entry into force of accounting circular 4/2016 and in particular, its Annex IX, on 1 October, which modifies circular 4/2004 for credit institutions. Initially, the Bank of Spain said that this new standard would hardly affect the final calculation of the sector’s provisions this year, but the reality is somewhat different, at least for several institutions, according to financial sources.

The body led by Luis María Linde has tightened the provisions for foreclosed assets. This twist has forced several entities to make fresh efforts in terms of their provisions, which will be deducted from their income statements. In response, some of the financial institutions had asked the Bank of Spain, during meetings that they are holding regarding the application of this circular, to relax certain concepts and interpretations of the standard. But it seems that the national supervisor has been indifferent to these requests, according to sources in the sector.

Ultimately, the Bank of Spain wants to force the banks to accelerate their property sales and get rid of their real estate assets as quickly as possible. Sources in the sector say that this is the message that the supervisor has been communicating in its meetings with the banks.

Linde wants the sector to significantly reduce their assets, which amounted to more than €84,000 million at the end of 2015. Sources indicate that the Bank of Spain has not set a date for this reduction, but it seems to be clear from both the conversations and the regulations that it seeks to considerably reduce the figure over the next three years. The problem is that the foreclosed asset balance has increased quarter after quarter since the outbreak of the financial crisis in 2008, despite attempts by the sector to sell off properties at significant discounts.

In fact, the heavy weight that these foreclosed assets continue to represent on the balance sheets of Spain’s banks is one of the main criticisms levied by the European Central Bank and other international supervisors.

Over the last three years, the banks have accelerated the sale of these assets, but the incoming volumes still exceed those sales. In addition, the large speculative investment funds, which were previously committed to purchasing large packages of properties, have now reduced their operations, and some are even exiting from certain property purchase operations ahead of time as they are obtaining lower returns than expected, indicate sources at one major bank.

The new accounting circular not only affects the financial institutions, but also the partners that manage those properties, such as Altamira, Aliseda, etc. In the case of La Caixa, it affects its holding company, Criteria, which owns €2,600 million of foreclosed assets and CaixaBank, which holds another €7,122 million. The same thing has happened in the case of Bankia, with the circular affecting both the bank and its parent company BFA, even though that group transferred most of its foreclosed assets to Sareb.

The main domestic banks are racing against the clock to ensure that the Bank of Spain approves their internal risk coverage models, including foreclosed assets, before the end of December, which, according to several sources, would bring some relief in terms of their new provisions. The circular also requires the banks to perform annual appraisals of their foreclosed real estate assets (…).

Original story: Cinco Días (by Ángeles Gonzalo Alconada)

Translation: Carmel Drake

Bank Of Spain: Unemployment May Drop To 20% By Q4 2016

18 August 2015 – El Economista

The Governor of the Bank of Spain, Luis María Linde, believes that the unemployment rate may decrease to around 20% by the end of 2016, if the trend observed over the last 18 months continues.

That was the prediction he made today (Tuesday) during his appearance before the Congressional Budget Committee, where he gave an update on the progress of the draft bill for the General State Budget (‘Presupuestos Generales del Estado’ or PGE) for 2016.

According to Linde “the greater flexibility that companies now have to adjust their workforces, to reflect changing macro-economic and competitive environments, has enabled the creation of new jobs”.

“If the trend observed over the last year and a half continues, then the increase in employment may bring the rate of unemployment down to 20% by the fourth quarter of 2016”, he added. According to the Government’s forecasts, the unemployment rate should fall to 19.7% by the end of next year.

Temporary contracts remain stable

Moreover, he rejected accusations from the opposition party that the labour reform passed in 2012 has lead to an increase in job insecurity, stating that the proportion of permanent and temporary contracts over the total is practically the same as it was four or five years ago. (…).

Approval of the Government’s forecasts

Linde thinks that the forecasts made by the Government in its draft bill for the PGE for 2016 are “feasible”, even though they differ from those published by the supervisory body itself.

The Government has indicated that the macroeconomic projections in the accounts for next year reflect a “prolongation of the current phase of expansion”, which is “feasible, in the current context”.

Specifically, Mariano Rajoy’s Government believes that the economy will grow by 3.3% this year and by 3% next year, with a recovery in inflation of around 1.1%, which will take the nominal GDP rate to 4%.

The Greek rescue “will bring stability”

The Governor of the Bank of Spain said that the third Greek rescue plan is the most “complex and demanding” of those agreed hitherto between Greece, the European authorities and the IMF, but he believes that its implementation will only serve to strengthen the euro zone and stability in the region. (…).

Original story: El Economista

Translation: Carmel Drake