Of Special Interest


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3rd February 2012

Spanish plan for bank asset write-downs

Lui de Guindos, Spanish Finance Minister has laid out a plan to require banks to write down more of their doubtful property and development assets over the next two years. The announcement has been expected for many weeks. Total writedowns are estimated at €50bn (£41bn $65bn ¥5.0tr Y413bn). The government has said it will not inject any public money to assist the banks. There is the existing restructuring fund, FROB which may offer some banks assistance. This fund has mainly been used when banks agree to merge.

Two specifics given by the minister were undeveloped land which must be written down by 80% and new homes 35%. The current requirements are 31% and 25% respectively. The minister argues that this plan will encourage banks to dispose of more of this type of asset giving Spanish people the chance to buy more affordable homes.

The ability of some Spanish banks to meet the new requirements is questioned by many analysts. Bankia is nearly always used as the example of the bank that may not be able to survive under the regime - though the bank maintains it can meet the new regime targets. A number of banks made additional writedowns in their 2011 accounts anticipating the new rules - but by no means all of them.