Brussels, 03/06/2013 (Agence Europe) - The restructuring of the Spanish financial sector (a requirement for the European aid package) is continuing as planned, said the European Commission and European Central Bank in a joint press release on Monday 3 June 2013 on the third fact-finding mission that the two bodies completed in Madrid at the end of May. The next fact-finding mission will be in September.
Representatives of Spain's lenders say: “Spanish financial markets have further stabilised since the last review, with sovereign and corporate bond yields dropping amidst lower volatility. In parallel, the liquidity situation of the Spanish banking sector has further improved. This allowed Spanish banks to further regain access to funding markets and to reduce reliance on central bank financing. Also, the solvency position of Spanish banks has been bolstered after the recapitalisation of parts of the banking sector and the transfer of assets to SAREB (the Spanish asset management company), and solvency rates are above regulatory requirements”, (see EUROPE 10778).
“Notwithstanding these welcome developments, given the adverse economic situation, continued deleveraging needs of the Spanish non-financial sector, and adjustment in the real estate market that continue to severely affect lending volumes and to impact the asset quality of the Spanish banking sector, a close monitoring of the system should continue in order to preserve the final stabilisation of credit institutions. Vigilance is required to help ensure that these positive trends in the stabilisation of the Spanish financial sector can be maintained. It is also essential that burden sharing measures are completed and finalised as scheduled. In this context, the Spanish government has engaged in reconciling and balancing the justified concerns of mortgage debtors with imperative financial stability concerns. The implementation of the new law on this matter should be monitored to assess whether the trade-off achieved is appropriate or adjustments to guarantee financial stability are required. An ongoing diagnostics of the evolution of asset quality, the solvency situation and resilience of Spanish banks remains important in this context, in particular against the background of a nearing end of the programme.”
The Commission says that in its economic recommendations for Spain (see EUROPE 10855), it suggests giving the country a further two years (until 2016) to bring its public deficit below the 3% of GDP cut-off point. It recommends that Spain speed up its structural reforms, which it says should cover the pension system and the market for good. (MB/transl.fl)