Il Spanish government has launched a new banking reform, the fifth in three years. This was announced today by Deputy Prime Minister Soraya Saenz de Santamaria. The provision was necessary to honor the agreements that Madrid signed in July with Europe and have access to 100 billion aid made available by Brussels to recapitalize the institutions of the Iberian country, on its knees after the housing bubble burst.
The main novelty introduced by the reform is the creation of a "Bad Bank“, where the toxic securities that today endanger the survival of Spanish banks will be transferred.
Economy Minister Luis De Guindos explained that this sort of junk bond container should come on stream at the end of November and remain active for about 10-15 years. The price of the assets will be established by the Bank of Spain and - De Guindos explained again - it will have to allow the institution to have profits in the long term.
The reform launched today also establishes that Spain will be able to liquidate those banks that will not be able to repay the aid received within a reasonable timethe. Madrid is also planning to further cut executive salaries of institutions that have received financial support.
The decree was supposed to be approved last Friday, but the European Commission had asked for a one-week postponement to be able to analyze the details of the text.
