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| Rehn |
The European Commission welcomed a Spanish move that forces strapped banks to establish a new €30bn ($39bn) loan cushion and rid their accounts of risky property assets.
Olli Rehn, Europe’s commissioner for economic and monetary affairs, praised the plan in a statement.
“These actions should dispel the lingering doubts about the stability of the Spanish banking sector,” he said.
“The combination of increased provisioning against potential future losses, segregation of troubled assets, independent validation of balance sheets, and the availability of necessary public funds to support the overall reform effort is essential in order to reinforce investor confidence in Spanish banks,” he said.
Rehn said the European Commission, the EU executive, would continue to cooperate closely with Spanish authorities reform, and that measures implying state aid would have to be analysed and approved by the Commission.
“A prompt and profound reform of the banking sector is a cornerstone of Spain’s crisis response and its overall reform strategy,” he said. “It is an indispensable supplement of the determined fiscal consolidation and front-loaded structural reforms that can bring sustainable growth and more and better jobs.”
Rehn also voiced hope that the move would help Spanish banks regain the confidence of financial markets and institutional investors.
Prime Minister Mariano Rajoy’s government took the dramatic step Friday, two days after it nationalised the fourth-biggest Spanish bank, Bankia, to salvage a balance sheet drenched in red ink.
Madrid will charge two independent auditing firms with valuing banks’ exposure to the collapsed property sector, which is still reeling from a housing bubble that popped in 2008, ministers said.
Banks have already been told to set aside €53.8bn as a buffer against expected losses from real-estate loans on which borrowers are likely to default.
While the banks have been tasked with finding the money, a Spanish public aid fund might lend them some of it in exchange for stakes in institutions that have to ask for help, Spanish authorities have indicated.
The Bankia operation was the eighth such move since 2008.
Bank of Spain figures show that commercial banks held problematic real estate assets, including loans and seized property, worth €184bn, equal to 60% of their property portfolio at the end of 2011.