Financial Services Report Spain
The Economist Intelligence Unit, December 2012, Pages: 21
The Spanish banking sector has come under severe pressure since early 2012, mainly because of its exposure to the country's troubled property sector. Given the difficulty for the government to raise the funds necessary to rescue financial institutions, it was forced to ask for external help. This has led to an agreement between the Spanish government and European institutions to offer a loan to Spain's Fund for Ordered Bank Restructuring (FROB) in order to recapitalise the troubled banks.
The European Stability Mechanism (ESM) offered up to EUR100bn, and a decision was taken in early December 2012 to release a first tranche of EUR39.5bn to shore up the first group of four banks. Retroactive direct recapitalisations by the ESM were ruled out at the October EU summit, so that the cost of the bank bail-out will end up on the state's books. Although a commitment has been made that the funds injected would not legally have seniority over existing loans, their exact status is not clear.
The bail-out will be conditional on significant downsizing of the banks concerned, which must close branches, cut jobs and shrink balance sheets. Importantly, a financial haircut will be forced on private investors in the banks' bonds, which could become a politically and socially contentious issue, as many holders are small retail investors who were sold products unaware of the potential risks.
Industry List: Financial Services
Industry Codes (NAIC): 52
Industry Codes (SIC): 60
Financial Services Report Spain
Market data: Financial services at a glance
Market data: Market opportunities
Market data: Key indicators
Financial services report
Overview
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Financial markets and instruments
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Overview
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Monetary and currency policy: Monetary policy
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Spain at a glance
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