Spain has made ‘major progress’ on banking reform, says IMF

4 Feb 13
Spain has completed ‘the bulk’ of the financial services reforms that are a condition of its €100bn banking bailout, according to the International Monetary Fund.

By | 4 February 2013

Spain has completed ‘the bulk’ of the financial services reforms that are a condition of its €100bn banking bailout, according to the International Monetary Fund.

The country’s clean-up of its under-capitalised banks was at an ‘advanced stage’ and ‘key reforms’ of its financial sector framework had been either drawn up or adopted, the fund said in a statement issued today.

Spain requested the bailout last June. To date, it has received €39.5bn and has recapitalised four nationalised lenders – the ‘Group 1’ banks, which include BFA-Bankia, NCG Banco, Catalunya Banc and Banco de Valencia.

The IMF, which is advising the Spanish banks and European Union on the bailout programme, said the action taken so far to address banks’ capital shortfalls was a ‘major achievement’ that should ‘strengthen confidence in the system and improve its ability to support the real economy’.

It added: ‘Remaining elements of the recapitalisation and burden sharing exercise should be completed in a timely manner and in ways that minimise taxpayer costs.’

‘Important progress’ had also been made in relation to Sareb – the ‘bad bank’ set up as a condition of the bailout to take over and sell assets owned by Spain’s weakest banks. ‘Key achievements include the establishment of the company, the receipt of real estate-related assets from the weakest banks, and the adoption of strong servicing agreements with participating banks to manage the transferred assets,’ the IMF said.

Safeguarding the gains made under the bailout programme to date would require close monitoring of Spain’s financial system. Specific timelines should be drawn up to implement the planned strengthening of the Bank of Spain’s supervisory powers, it added.

‘It will be important to maintain this momentum with strong completion of initiated reforms and continued vigilant oversight, as risks to the economy and hence to the financial sector remain elevated as Spain undergoes a difficult process of fiscal and external adjustment,’ it explained.

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