Quote:

Spanish banks need up to 62,000 million in the worst case scenario

Spanish banks need between 51,000 and 62,000 million euros to address a cumulative fall in GDP of 6.5% until 2014, according to results published by the Government and the Bank of Spain for the stress tests conducted by Roland Berger consultants and Oliver Wyman.

EFE

Thursday, June 21, 2012 - 18:00 pm.

In a press conference at the Ministry of Economy, the Deputy Governor of the Bank of Spain, Fernando Restoy, unveiled this range and stressed that the EU aid of up to 100 billion euros will be more than enough.

We are talking about manageable numbers, added the Secretary of State for Economy, Fernando Jiménez Latorre.

According to Roland Berger, in the most adverse of scenario estimates, the bulk of the Spanish financial institutions - 14 entities - need about 51,800 million, while for Oliver Wyman, they will require between 51,000 and 62,000 million euros.

All this to maintain a capital ratio of at least 6% in a scenario in which the cumulative fall in GDP is 6.5% through 2014, compared with 5.4% used in the exercise conducted recently by the IMF.

In this scenario, housing prices would fall by another 26.4% (compared to 23.5% from the IMF), which would translate into a collapse of between 55% and 60% since the peak of the bubble, and for land, between 85% and 90%.

The three main conclusions of the study, according to Restoy, is that everything seems to indicate that capital needs will be concentrated in entities that currently participate in the FROB, such as Bankia, CatalunyaCaixa, Novagalicia and Banco de Valencia.

The larger institutions, Banco Santander, BBVA and CaixaBank would not need additional capital even in that adverse scenario, while a third group, which would be seven entities, could get by their own means or with some form of "moderate" public aid.

Given such, for both Restoy and Jimenez Latorre, the core of the Spanish financial sector has the capacity to withstand macroeconomic scenarios as adverse as those contemplated, and that the 100 billion euros available proportion a "vast" margin.

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Last modified: 2012-06-21 13:31:07 by highrev