Brussels, 23/08/2012 (Agence Europe) - The Spanish government has until the end of the month to present its reform on oversight of the banking sector, the spokesman for Economic and Monetary Commissioner Olli Rehn said on Thursday 23 August, adding that, “once the formal proposal has been adopted, we shall be able to comment on it”. This reform represents a measure to be taken as a complement to the maximum support of €100 billion promised by the eurozone with a view to restructuring Spain's banking sector, which was crippled by the property crisis that still affects the country. It is seen as a testing ground for developments in European legislation on restructuring of the banking system.
According to the daily El Pais, the measures, to be presented by the Spanish government on Friday, aim to grant more upstream and more intrusive power to the national supervisor, namely Spain's central bank, which is accused of having taken too little action too late during the difficulties that have affected the regional savings banks. El Banco de España may therefore intervene as soon as there are “objective” signs that a bank is no longer able to abide by its obligations with regard to solvency and liquidity. Thus, the supervisor may impose recapitalisation at an earlier date, with a shorter time for reimbursement, and dismiss those at the head of the entity in difficulty. After the preventive action phase, the Spanish rescue fund (FROB) will, if necessary, take over and proceed to the restructuring, if not the dismantling, of banks on the brink of bankruptcy. In addition to the creation of entities allowing impaired assets to be separated, the FROB will be able to impose losses on the creditors of the restructured banks. Internal “bail in” instruments will then be applied, allowing shareholders and creditors to make a contribution and, ultimately, allowing the level of state intervention through public capital to be reduced. According to the legislative package presented early June by the European Commission, the “bail in” instruments will not apply until 2018. (MB/transl.jl)