What the Bank of Spain will do next

We seldom believe anything. But maybe we should give credit to Luis Linde, governor of the Bank of Spain, and his announcement of the greatest transformation of banking institutions throughout this financial year. Citizens see banks as the crisis’ bête noire. There are other opinions, of course, but this one happens to be the most common and dullest of all.

Ángel Luís López Roa, one of Linde’s men, wrote the report “Analysis of the monitoring procedures of Bank of Spain” (“Análisis de los procedimientos supervisores del Banco de España”), a file unanimously backed by the Executive Commission. To sum it up, this report wants the Bank of Spain to gain access to the critical “information given to advisers and members of the executive commissions”.

At the same time, it props the Bank of Spain to identify inappropriate posts within executive boards. Likewise, it should have the capacity to give opinions about the professional skills of the highest echelons of private banking. A significant body of proof suggests the disasters in the sector were caused not by the institutions itself, but by their executive members. Especially, because many of them were coming from fields unconnected to the banking sector.

The sixteen most important financial institutions will count with sophisticated inspectors. They will act as a sort of banking police who will ask for the real accounts. Nevertheless, before Linde’s promising innovation, other issues need to be tackled. Prosecutors are investigating the very Bank of Spain, following Association of Inspectors’ complaint against the serious conduct of this supervising body: it looked the other way when there was evidence of punishable conduct. In other words, the supervisor must be supervised and looked after.

Some of Luís Linde’s forecasts have been already implemented in a rather unorthodox way. Banking employment dropped to levels of 35 years ago, with the exit of 55,000 employees. Of course, among them there is not even one adviser or executive.

The 55,000 former banking employees will increase the figures of Spain’s National Institute of Employment (Inem). Eurostat, the Statistical Office of the European Union, confirmed that, in November, Spain surpassed the figure of 6.1 million unemployed. On the other hand, the Institute for Economic Studies (IEE) has it’s own and also discouraging forecast for our country: unemployment rate will rise to a 28% in 2013.

The country is in a very vulnerable situation. The Bank of Spain must be ready to take up the challenge and fulfil expectations.

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