Spanish Banks: Well Regulated but Still Suffering

Tuesday’s FT has a long piece on the Spanish banking system: you can read it here.   An interesting difference relative to Ireland is that the Bank of Spain insisted on banks building up reserves against general future risks. However, these provisions are not formally counted as part of its capital base and the general push towards higher measured capital ratios means that the Spanish banks are also looking to raise capital.  This may reduce the chances of these banks getting involved in acquisitions in Ireland, at least in the near term.

One reply on “Spanish Banks: Well Regulated but Still Suffering”

The relative caution of the Spanish regulators (and the big banks) presumably reflects their own relatively recent homegrown banking crisis — the so-called Rumasa affair of the early 1980s.

It is certainly praiseworthy (though not unique) that they avoided off-balance sheet vehicles.

I like the Bank of Spain’s statistical provisioning. (I’ve been recomending countercyclical bank regulation since 1995). But let’s not get carried away. For one thing, it may have had the effect of reducing specific provisions by the banks, and for another, it’s not big enough to achieve the sort of increases in bank capital that are really needed.

The FT story ends with a box on the regional savings banks (Cajas). That looks like where the interesting action will be.

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