Close X Cookies are necessary for the proper functioning of 24hGold.com. By continuing your navigation on our website, you are accepting the use of cookies.
To learn more about cookies ...
EnglishFrench

Another Warning Call for Depositors! Bank of Spain Says Spanish Banks Need €10bn More Loan Loss Prov

IMG Auteur
Published : May 24th, 2013
424 words - Reading time : 1 - 1 minutes
( 0 vote, 0/5 )
Print article
  Article Comments Comment this article Rating All Articles  
0
Send
0
comment
Our Newsletter...
FOLLOW : Bailout, Spain
Category : Crisis Watch

Here's an optimistic headline on the Financial Times that could easily be off by a factor of 10 or more: Spain’s banks need €10bn more provisions.

Spanish banks will need to put aside extra provisions of up to €10bn to cover loans that borrowers will struggle to repay, according to an internal estimate by the Bank of Spain.

According to recent data, Spanish banks rolled over more than €200bn of loans before they expired – often because corporate borrowers would be unable to repay their debt on time and in full. The €10bn estimate is the first official assessment of the likely impact of the central bank’s new approach towards these refinanced loans.

The Bank of Spain believes that the risks emanating from this practice, known as “extend and pretend”, have not been fully covered and is pressing all banks to reclassify their refinanced loans according to tighter standards by the end of September. The new regime will make it harder for banks to treat refinanced loans as if they were performing normally, in turn forcing lenders to take additional provisions.

“Our banks will need more provisions,” a senior official at the Bank of Spain told the Financial Times. “The provisions will affect their results, but the question is by how much. We cannot know for sure but we think the impact will be between €5bn and €10bn [in provisions] across the system.”
€10bn or €100bn?

Banks rolled over €200bn of loans because they could not pay debt on time, pretending the loans were current, and the Bank of Spain estimates the risk at a mere €10bn.

Who do they think they are they fooling?

Will 70% of those loans be paid back? 50%? 20%? I don't know but I strongly suggest it sure will not be 95%.

Given the perpetual over-optimism on Spanish bank losses, I estimate there is a 0% chance the losses on this disclosure will be as little as €10bn.

That said, I do not know what the existing loan loss provisions are, but if they are high enough (extremely doubtful), then there is some chance the losses will be on the order of €30bn or so (on the general principle things are typically 300% worse than the optimistic scenario).

This does not factor in losses on Spanish government bonds when Spain eventually seeks a massive bailout. Realistically, Spanish banks are insolvent.

Another Warning Call!

By the way, this is yet another warning call "If you have money in Spanish banks, move it somewhere else immediately!"

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Data and Statistics for these countries : Spain | All
Gold and Silver Prices for these countries : Spain | All
<< Previous article
Rate : Average :0 (0 vote)
>> Next article
IMG Auteur
Mish 13 abonnés
Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management. He writes a global economics blog which has commentary 5-7 times a week. He also writes for the Daily Reckoning, Whiskey & Gunpowder, and has over 80 magazine and book cover credits. Visit http://www.sitkapacific.com
WebsiteSubscribe to his services
Latest comment posted for this article
Be the first to comment
Add your comment
Top articles
Latest Comments
Man Grabbed, Crushed to Death By...
00:00user4779
The "lump of labour" fallacy raises its tired old head yet again, mixed in with B-movie-style sci-fi speculation about a terrible robotic future wo...
Max Keiser Interviews GoldCore’s...
03 Julovertheedge
"The IMF said that Greece requires additional bailout funds of around 50 billion euros until 2018 under the current bailout conditions, and slashed...
Greece’s referendum
03 Julend
"History may judge him instead to have played a poor hand very well indeed." I'm quite sure both Macleod and Varoufakis will be quite disa...
Gold Daily and Silver Weekly Cha...
02 Julglasstiger
Jesse, you use the term "could care less" frequently. Is this American speak for "couldn't care less"? Similar I suppose to the ubiquitou...
One more book, Mr. Stockman
02 Juluser4779-1
While it is true that "[Gold standards] were abused, suspended, and ultimately abandoned in favor of a currency that central banks could inflate at...
Panicked Hedge Funds Now Praying...
30 Junovertheedge1
"... and the silly game theory ..." Obviously you have no knowledge of game theory and its applications. Otherwise you wouldn't have used ...
The Gold Standard: Generator & P...
30 Junuser4779
Is it really so bad for Americans that they do not spend their lives labouring on a production line to make mass-produced goods, and have left this...
The Gold Standard: Generator & P...
30 Junsam_site
You state, “To continue selling to the West, China will have to open wide its doors to imports” Here’s the crux of your argument of why Chin...
Most commented articlesFavoritesMore...
World PM Newsflow
ALL
GOLD
SILVER
PGM & DIAMONDS
OIL & GAS
OTHER METALS
Mining Company News
Junex(Ngas)JNX.V
Junex Closes a Portion of its Private Placement for Proceeds of $5 Million
CA$ 0.80+0.00%Trend Power :
Corporate news
Fortune Minerals(Ag-Au-Co)FT.TO
Receives Notice of Default Under Prepay Facility and Reaches Agreement in Principle to Settle
CA$ 0.04+0.00%Trend Power :
Corporate news
Potash Corp.POT.TO
K+S says no basis for talks suggested by Potash Corp
CA$ 39.24+0.93%Trend Power :
Corporate news
EMED(Au-Cu)EMED.L
Director Share Purchase
GBX 4.63-2.53%Trend Power :
Corporate news
Golden West Res.(Fe)GWR.AX
Change in Substantial Shareholding - WPI
AU$ 0.05+0.00%Trend Power :
Corporate news
Potash Corp.POT.TO
Potash says confident can address K+S' concerns about takeover offer
CA$ 39.24+0.93%Trend Power :
Corporate news
Potash Corp.POT.TO
PotashCorp Confident K+S Concerns Can Be Addressed Through Collaborative Discussion
CA$ 39.24+0.93%Trend Power :
Corporate news
Tawana Resources(Gems)TAW.AX
Changes to Tawana’s Board of Directors | 71.72 KB
AU$ 0.00+0.00%Trend Power :
Corporate news
Teras Resources(Au)TRA.V
Teras Receives Results From Core Drill Program
CA$ 0.08-6.25%Trend Power :
Corporate news
Goldrush Res.(Au)GOD.V
Goldrush Announces Receipt of US$500,000 Payment and Appointment of New Chief Financial Officer
CA$ 0.02+33.33%Trend Power :
Corporate news
Comments closed