“The Spanish society is biased against reforms, but we need to go further”

Many observers insist that Spanish banks still need to come clean about their toxic assets. Should we expect any more nasty surprises?

Banks and savings banks are different realities, and not everybody understand this distinction. Now, our banks have so far focused all reviews on the so-called brick-and-mortar sector: loans to construction companies and developers, for which capital cover rates are being discussed. On the other hand, we are seeing increasing late payment rates on mortgages and loans to companies that can become a concern, taking into account the evolution of the unemployment and the general economy. But personally, I think we’ll have some recovery in 2014 and things will get better.

That is your main scenario.

Yes, it is. If there is no recovery at all, we will need to reassess our plans.

Will this recovery be just the result of the economic cycle changing or will the reforms implemented in Spain be the key?

To wait for the global economy to improve would be extremely lazy. I’m a bit worried about it because we still need more reforms and the Spanish society has historically been quite averse to changes. This is a country that would rather leave it for later, but the sooner we react, the better the future will be for us.

Why there has been so much opposition against rescuing banks?

There is a strong resistance to accept the reality, to accept that some measures are necessary although can be very harsh. Again, what we are talking here is the bailout of some savings banks, of their depositors’ savings. It should be done quickly so there is less impact over deposits and credit flows. In the US, everybody understood that the housing sector had fallen, but in Spain there is the belief that the economic cycle will at some point turn the page by itself, without deep reforms and adjustments.

But would our banks’ behaviour have anything to do with the current public anger against them?

The case of the selling of preferential shares is undoubtedly one of the reasons why the Spanish society feels bitter. It was the option many savings banks recurred to because they didn’t have shareholders and couldn’t expand their own funds. Companies have used prefential shares without any problem. Here what we have is a number of clients who allege they didn’t have enough information about the risks they were taking on but thought it was an alternative to deposits. Some of these clients were culturally bank depositors and have reacted angrily, yet some others were had a more sophisticated financial culture and are taking advantage of the situation to make others pay for their decisions.

Why did entities pushed these products so much on to all their clients?

At the time, the Spanish savings banks were under pressure to go public successfully and they needed more capital. The truth was that they also needed restructuring and a revaluation of assets, and radical new management.

And how were preferential shares given the okay without a secondary market?

Well, the situation back then wasn’t as dire as it became later. Initially, the entities calculated that they would have cash to pay interests but without remuneration these products looked worthless. There would be no problem whatsoever if preferential shares offered some return and there was a secondary market.

Isn’t it a contradiction that savings banks are at the heart of the banking sector’s troubles in Spain and yet the social demand for public banking is growing?

Revolutions in Spain are purely based on semantics. We have entrepreneurs but not proprietors, we have a banking crisis instead of a savings banks’ crisis, our companies generate value but we don’t talk about making money. Spain has difficulties to embrace the market economy due to certain lefty type of prejudices. People loved the cajas because they weren’t seen as part of the capitalist system but of the social economy.