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Spain will not ask for a bank rescue this weekend

Date: Friday 08 Jun 2012

Spain will not ask for a bank rescue this weekend

Spain will ask the European Union for bank rescue funds this next weekend, according to two senior EU officials being cited this morning by Reuters. Although no figure has yet been set, Eurogroup finance ministers will hold a conference call tomorrow to discuss the details and issue a statement thereafter that report holds. Remarks, yesterday, from the Spanish Prime Minister however would seem to argue for at least a slightly more delayed petition.

Next weekend may be a whole other matter add analysts at Digital Look.

Just how much money are we talking about?



This when markets are awash with various, and sometimes seemingly disparate, estimates of the recapitalization needs of Spanish banks.

For the International Monetary Fund those needs are said to amount to an additional €40bn, while Standard&Poor’s (S&P) estimates that Spanish financial institutions' capital needs now stand at between €10bn and €52bn (with €10bn of those expected to be put up by Spain). S&P however estimates that Spanish banks’ losses in 2012 and 2013 combined could rise to between €80bn and €120bn, with the lenders having the capacity to stump up for only €60bn of those. All of this under a 'base-case' scenario.

Ratings agency Fitch on the other hand seems to be taking a slightly more negative view. Last night its analysts argued that, “the likely 'fiscal cost' of restructuring and recapitalising the Spanish banking sector is now estimated by Fitch to be around €60bn (6% of GDP) and as high as €100bn (9% of GDP) in a more severe stress scenario, compared to a previous baseline estimate of around €30bn (3% of GDP).

Having said that, analysts at Digital Look point out that Fitch is simply ‘catching-up’ with what other analysts have been estimating for years now.

In part due to the above Fitch now sees Spain’s gross general government debt level peaking at 95% of gross domestic product in 2015, versus the 82% previously foreseen. The now higher than estimated financing gaps in several of the country’s autonomous regions probably explain much of the rest.

Ask me if you have any questions …



Those estimates from S&P and Fitch come on the heels of an interview with Antonio Lopez-Isturiz, head of the European Popular Party, yesterday morning, on Spanish state broadcaster TVE. In said interview the politician indicated that the government is exploring the possibility of requesting up to €100bn from the EFSF to prop up its ailing banks. "This fund [the EFSF] has €240bn and the figures being discussed [for Spanish banks] are around €80bn to €100bn," he said.

He added, however, that Spain will not take a decision until the International Monetary Fund (IMF) completes an assessment –possibly on Monday- of banks’ capital needs, which some news reports say could amount to about €40bn.

The above remarks drew a somewhat angry response from the country’s Prime Minister, Mariano Rajoy, who speaking after a meeting with Dutch Prime Minister Mark Rutte stated that, “if you want to know, then ask me. Unless someone happens to know more than the President. I can understand that everyone wants to know, but things must be pondered and reflected upon.”

Mr. Rajoy added that, the IMF aside, he is also waiting to learn the results of the independent study of the country’s lenders which was commissioned to two foreign consulting firms, Roland Berger Strategy Consultants of Germany and Oliver Wyman of the US before taking any decision. This report is expected at sometime during the second half of the month.

AB

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