Ana Linares. Madrid.
The health and the restructuring of the Spanish financial system has been one of the most structured processes worldwide in the last years. Its weakness in an environment of strong economic correctness became, for many, the lever activating the destruction of the Eurozone. Finally, and, thanks, among other things, to the support of the ECB, Spanish banks seem to be leaving the worst part behind them, although they still have some important challenges ahead.
When the financial crisis was set off in the main developed countries of the world, both the authorities and the sector were excluded from the process. For example, in 2008, the Government of the United States put around 245,000 million dollars at the disposal of its banks. In the United Kingdom, the invoice of three of its big firms –RBS, HBO and Lloyds– cost them a bit less than 50,000 million dollars. They were not the only ones; we have to remember that after Lehman’s bankrupt, the Irish financial system sank leading to the Irish bailout.
Germany also had to go to their rescue allocating more than 50,000 million euros to save some of the big firms such as Commerzbank or the HypoReal.
However, Spain was late to join this trend. So late, that it got attention from the entire international community. Problems in the country’s bank started to be obvious with the collapse of the real state and building sectors and the consequent increase in unemployment.
A lethal combination for a country and a financial system overflowing with credits for a population that was about to stop paying in the coming months. So much so that it went from a default rate close to 2% in 2007, to a percentage of unpaid credits of more than 13.5% at the end of 2013. That means about 5 percentage points higher than it was in the previous economic crisis of the 90s.
Although there have been banks with problems needing financial support from the State, most of the aid has been destined to the savings banks sector. For the moment, the data about the money used for the restructuring of the sector vary according to the source. For the State, the support from 2009 represents around 60,000 million euros, about 8,000 more than what the Spanish Banking Association (AEB in its Spanish acronym) handles, which is less than 54,000 million euros.
Some experts believe that between the aid, the money allocated to the bad bank and other similar things, we could talk about some more than 200,000 euros.
From the money requested by the State from the European Union to save the sector, (such as, for example, Bankia), some more than 41,000 million euros have been used in an operation the IMF itself considers as completed.
The two executives managing this matter, the socialist of José Luis Rodríguez Zapatero and the one chaired by Mariano Rajoy from the People’s Party, tried to solve the issue although none of them did it in a convincing way.
The last government, the one that finally went to Europe, needed two Royal Decrees so that the Spanish banks finished to cover all the credits in their balance and to improve the ratios of their capital.
According to data provided by Morgan Stanley, the Spanish banks have covered 250,000 million and 130,000 million of capital have emerged since 2008. According to the bank, “the increase in the brick coverage, along with the stress tests in 2012, has achieved a reasonably capitalized sector”.
According to data of the Spanish Banking Association, until the end of last year “the Spanish banks had covered around 15% of their loans”, which has allowed them to have an average core capital of 11.7% at the end of last year.
Nobody believes the increase of 1% in the GDP in 2014 helps Spanish banks to take off
However, this late exercise, compared to the rest of the banks in developed countries has cost them blood, sweat and tears through a wander in the wilderness that could still last some more time.
Because being able to get benefits in an environment where unemployment is still high, consumption is still depressed and, above all, interest rates do not go up, is, according to all analysts, complicated.
Although there is an agreement concerning an expected raise of 1% in the GDP this year –against the reduction of the two previous ones– and they foresee a fall in unemployment, nobody believes this environment would help Spanish banks to take off. This is something causing concern, not only because the unblocking of the economy’s funding is in their hands, but also because the importance goes beyond that.
Just one more piece of information: banks are 40% of the Spanish Stock Exchange, one of the equity markets with the biggest representation in the sector in the entire world.
Tomorrow, last issue: First steps to a lengthy recovery.