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The highly anticipated, independent audit of Spanish banks has been slammed by many analysts who say the sector will need much more than the €59bn concluded by the report
05.10.12 - 12:47 -
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Spain’s banks need €59bn
Deputy Governor of the Bank of Spain, Fernando Restoy, followed by the secretary of state for the economy, Fernando Jiménez Latorre. EFE
Spanish banks need up to 59.3 billion euros to recapitalise, according to an independent report on the sector published last Friday.
The ‘stress test’ audit, carried out by consultancy firm Oliver Wyman, paves the way for the government to request rescue loans for the beleaguered banking industry that Europe finance ministers have agreed to extend.
The figure produced by the study was significantly lower than the potential 100 billion euros that Madrid had negotiated in June with eurozone officials.
Half of the 14 banks do not require any rescue funds, the report concludes. Santander, BBVA and La Caixa, Spain’s three largest financial institutions are amongst them.
The audit was prompted by the Spanish government’s nationalisation of the crippled lender Bankia in May and indications that several others were also on the verge of collapse.
At a press conference to present the organisation’s findings, the secretary of state for the economy, Fernando Jiménez Latorre told reporters it is likely that Spain would soon request just 40 billion euros (of the 100 billion on offer) and that this should send a signal to investors that Spain’s banking industry is on the brink of a recovery.
“With this process, capitalisation and restructuring needs will all be met,” he said.
“All doubts about the strength of the [banking] system should be dispelled. The bulk of it is solid, and the problems are now well-identified.”
Similarly, both the European Commission and the European Central Bank have issued statements supporting Oliver Wyman’s conclusions. The former comments: “This is a major step towards strengthening the viability of the Spanish banking sector.”
Despite officials in Madrid and Brussels, and crucially Berlin, backing the findings, many analysts and investors have been left unconvinced by the audit.
Moody’s, the hugely influential bond credit ratings agency, says that Spanish banks need almost double the amount suggested in the Oliver Wyman report. “The amounts published by Spain are below what we estimate are needed for Spanish banks to maintain stability,” says a Moody’s spokesman.
Whilst Daragh Quinn, a Madrid-based Spanish banks analyst at Nomura, a major global investment bank, tells this newspaper: “They’ve gone to all this effort but what they have come up with is unlikely to change the opinions people formed in June.
“Most analysts agreed some time ago that 60 billion euros is not enough to alter investors’ view of the Spanish banking sector.”
Media observations
Many powerful media organisations, and their in-house commentators, have also slammed the audit’s results.
The Wall Street Journal claims that “guessing at banks’ losses without using market information is a kind of palmistry”; whilst the Financial Times’ investment editor, James Mackintosh, comments: “If Europe rallies round, Spain can avoid financial collapse. But investors should not put their faith in the stress tests.”
The International Financing Review went further on Tuesday and led with the headline: “Don’t believe the OW results: Spain’s banks are screwed.”
Indeed, even before the report was published some took to social media sites to question its validity.
Hours before the findings were released, Faisal Islam, the economics editor for Channel 4 News, posted on Twitter: “World is waiting on Oliver Wyman assessment of solvency of Spain banks. In 2007 bankrupt AngloIrish was crowned best bank in the world by...”