Recapitalize a "toxic" banking system, relaunch the country's economy and restore healthy credibility on international markets. These are the priorities Spanish Prime Minister Mariano Rajoy and Economy Minister Luis de Guindos. In recent days, the hypothesis of a request for aid from the Financial Stability Fund (EFSF), accompanied by a major intervention by the European Central Bank (ECB) on the markets, seems ever closer. Confident that the injections of European capital will arrive shortly, the yields of the Bonos have plummeted dramatically: 6,3-year bonds have fallen to 3,53% and two-year bonds are at their lowest since last May (today at XNUMX%).
RESCUE – As regards the hypothesis of formally asking for help from the State-saving Fund, Minister De Guindos declared that Spain's fate will be known within a month. On September 6, the ECB Council will decide what they are "extraordinary measures" to be made on the markets. In mid-September, the Eurogroup and Ecofin will meet to define the reference framework and the procedure with which to carry forward the decisions of the ECB. At that point Rajoy's executive will "consider" the possibility of asking for help, "examine the alternatives" and make his choice. De Guindos, speaking of the intervention he expects from the ECB, said that “it must concern a sum that does not leave the slightest doubt, the lesser uncertainty. These are interventions that must be strong, to which a limit cannot be set, nor can the quantity and time in which they will last be made explicit".
BANKING SECTOR REFORM – This week, however, the eyes of the Spanish Executive are focused on the banks. On Friday 24 August, the government will present to the Council of Ministers the reform of the banking sector, necessary to obtain the 100 billion euro aid from the European Union in November. De Guindos anticipated some details, such as the creation of the so-called "bad bank", the Sociedad de Gestión de Activos, which will collect all the toxic assets held by Iberian credit institutions. The regulatory framework of the Fund for Olderly Bank Restructuring (Frob) will also be implemented, whose supervisory powers will be increased. But above all, severe restrictions will be imposed on the sale of "preferential holdings", a special type of perpetual bond (which never expires) and which has a yield linked to the bank's profit. Many institutions have made more than a million savers buy these toxic securities, without their knowledge or without being aware of what they entailed.
BANKS – "The Banco de España is considering the circumstances that would justify the application of the emergency procedure" which allows for an advance of 30 billion to be requested for the recapitalization of banks that are in perilous conditions. This was stated by Minister de Guindos, recalling that "these are capitals available only if it considers that some institutions have specific needs before November", the date foreseen for the arrival of the 100 billion from the European Union. “If there was an extraordinary situation, the emergency procedure could be requested. But this must be assessed by the Banco de España. And so far it hasn't happened." So perhaps Bankia will have to wait until November before receiving the first injection of fresh capital.
