The Spanish banks that have been intervened or needed public cash may see softer conditions than those in the plans first drafted by the European authorities and supervised by the so-called Troika–which refers to the European Commission, the European Central Bank and the International Monetary Fund. This week, the IMF has pushed for more flexibility to allow financial entities a wider margin of lending activity towards companies and entrepreneurs.
The Commission and the ECB already highlighted at the beginning of July the lack of credit in the Eurozone economies, but said nothing about relaxing recapitalisation plans or the stringent capital ratios with which healthy banks have to comply.
Banks either under government control or supported by the taxpayer (from Bankia to Catalunya Caixa and the group probed by auditor Oliver Wyman) were committed to fulfil all requirements about valuation of toxic assets, cutting down dimensions and limitation in certain sectors due to competition rules. But the IMF in its latest paper about the banking industry in Spain admits some points could be excessive and damage the economic recovery of the country.
Indeed, the banks affected had warned that they would be unable to offer credit under the current plans, and would only focus on reaching the bureaucratic targets that had been imposed. As John Adams said, facts are stubborn things, though: independent banks have turned out to be too slow to lend again sufficiently to fight the recession, and mounting pressures on public funds-dependent banks have provoked deposit flights towards stronger entities and further deterioration.
The IMF also assured that Spain’s banks are now sounder and safer, and added that dividend payments should be reduced and provisions extended, something the Spanish government and the Bank of Spain had already ordered.
What’s next, then? Plans to auction NCG Banco and Catalunya Caixa have recently been reopened, while Bankia would have to go solo and show some muscle.