By Luis Arroyo, in Madrid | At FTAlphaville there recently was talk about the Spanish banking system. Sí, that particular banking system that, according to the Bank of Spain governor Fernández Ordóñez, has fixed itself without the nation’s Treasury putting any euro at all. The answers to questions like who ordered him to say this, and what for, when everybody knows and complains about public capital injections in our banks are beyond my imagination.
But Fernández does not lie, as it shows in the Bank of Spain’s chart reproduced by FTAlphaville: the last column of ‘loans made by the government’ is empty. I said it before and I say it now: what we have witnessed in Spain under the central bank supervision was forced takeovers and mergers using the method of convincing one by one, as the governor himself explained once, who should have instead imposed some common sense. Now, the markets don’t quite know if the entities are efficient in any aspect but in hiding the plight of each other’s capital.
Meanwhile, the non-performing loan ratio reaches 8.12%, as calculated by dividing the bad debtors column (in red) by the total credit column (in blue).
The ratio is now 8.16 per cent.
You can compare the left-most column (total credit) and the almost-right-most column (‘doubtful debtors’, circled in red), to get an idea of how much the ratio has risen since 2006.
What’s also interesting is the last, and to date empty, column…
The second image is courtesy of Reuters, and it is very clear: above, it shows the link between the rate of bad loans and the evolution of Spain’s GDP; below, the same data on bad loans are put against the unemployment rate.
Apparently, these scenarios are missing in the picture that governor Fernández paints. They would bring in the dynamic reality, but he prefers a still snapshot in which banks have not collapsed at a time when his mandate comes to an end. He will quietly go back home, while bad loans are still rising, GDP falling and unemployment looks out of control.
The truth, though, is that we have lost four years. The Bank of Spain governor boasts about it. And labour reforms and fiscal constraints will not help.