The cost of the rescue to the banking in Spain doubles the European average

The cost of the rescue to the banking in Spain doubles the European average

Spain will get a bill for the rescue of its bank . It is one of the countries in the European Union that will cost the financial sector more expensive in relation to the size of its economy: almost twice the European average, always in proportion to GDP (gross domestic product).

According to the latest report of the European Commission, with data from 2008 to 2012, in Spain, total capital aid amounted to 88,140 million, representing 8.4% of GDP. While the average in Europe is 4.6% over GDP, up to a total of 591,900 million.

Only four countries exceed Spain. This is Belgium, where direct aid accounted for 10.7% of its economy; Ireland, which shoots up to 40% of GDP; Greece, with 19.2% and Cyprus, with 10.1%. In the rest of the countries, the total aid to GDP ratio is below Spain (see graph).

Another thing is in absolute terms. In that case, Germany leads the ranking, with a direct injection of 144,150 million; followed by the United Kingdom, where the capital that was provided amounted to 122,800 million. And in third position, Spain appears, with those 88,140 million.

The rescue of banking in Spain raises many questions among citizens about the real cost or how it will be paid. Each organism offers different figures. In Spain, until now, the Court of Accounts and the Bank of Spain have made some approximations. The first estimates that the aid amounts to 107,913.5 million while the regulator estimates that it is 94,157. Of this last amount, 61,495 million correspond to capital injections while the European Commission recognized 26,645 million more in 2013. The deputy governor, Fernando Restoy, explained last week that this gap is due to the accounting of the assets of the bad bank, Sareb .

Anyway, the Spanish State calculates that, for now, only about 4,000 million can be recovered. Of which, 1,760 million come from the sale of Novagalicia and the returns made by CaixaBank to Banca Cívica. Another 1,135 million euros for the redemption of convertible debentures of Ibercaja, Unicaja and Liberbank. And the remaining 1.3 billion from the sale of 7.5% of Bankia, although these remain in the balance sheet of its parent company, BFA.

The Economy Minister, Luis de Guindos, said last week in Santander that the final result of the restructuring of the sector will not be known until the total sale of Bankia. Novagalicia was placed with more than 8,000 million losses. And now we are working on the sale of Catalunya Banc, for which new aid or guarantees are already being designed. The FROB (Fund for Orderly Bank Restructuring) is also still present in the capital of BMN, an entity for which a future placement on the stock exchange is not ruled out.

Be that as it may, it is not only a problem that Spain has had to face, but in many other countries of the European Union it has also come to the rescue of their respective financial systems. In Spain almost 50% of the sector, the old savings banks, went through very complicated situations, on the verge of bankruptcy. If they had been other types of companies, they would have ended in liquidation. Guindos argued that it is not good to look back, but the key is that the sector is already healthy.

The issue has not been easy to solve in Europe because since the recession began, seven years ago, governments had to go to the rescue of their banks to solve problems of liquidity and solvency. In a first phase, they articulated liquidity measures through the issuance of guarantees and the purchase of financial assets. In some cases, like Spain, the issuance of the bonds issued by the bad banks created was guaranteed, thus assuming more risk. In the second phase capital had to be injected into the banks, which will raise the public debt.

For the professor, Joaquín Maudos, from the University of Valencia, in Spain several games were applied. The injections of the deposit guarantee fund (FGD), which the European Commission considers public, but the origin of its financing comes from the contributions of the bank. The FROB 1 (8,317 million) the FROB 2 (5,183 million) and the funds from Europe through the Mede, which were distributed in 39,078 million for banking and 2,192 million for Sareb.

From direct aids in the form of capital to banks, four entities absorbed 93%: 22,424 million in the case of Bankia; 12,055 million Catalunya Banc; 9,055 million Novagalicia and 5,500 million went to Banco de Valencia.

Others (CAM, Unnim …) received asset protection schemes (EPAS), which guarantees future losses to their buyers due to the deterioration of future assets.

For Maudos, in the case of Spanish banks, “only the time and the recovery of the macroeconomic picture will tell whether public aid to banks will translate into a new burden for the taxpayer, since the recovery value of the sale will depend on that recovery. the nationalized entities, the potential losses associated with the asset protection schemes (EPA) granted by the FROB in the adjudication of some entities and the profitability of the Sareb business plan, whose bonds are guaranteed by the state and a portion of your capital is owned by the FROB. “

The president of Caja Rural del Sur is looking for credit unions the same treatment as in Europe

The president of Caja Rural del Sur is looking for credit unions

The president of Caja Rural del Sur, José Luis García-Palacios Álvarez, stressed this Thursday that “the scenario” that Spanish credit cooperatives long for, like the one he leads, is that the central government “and our regulator, the Bank from Spain, could consider credit cooperatives as they do in Germany, France and Holland. “

García-Palacios has expressed this desire in the framework of the conference on ‘The credit cooperative, origin, evolution and current situation’, which he has offered at Círculo de la Amistad de Córdoba, after being presented by the president of the Cajasol Foundation, Antonio Pulido, within the Economy and Society Forum, organized by the Association of Manufacturers of Córdoba (Asfaco), and with the assistance, among other authorities, of the fourth vice president of the Diputación de Córdoba, Salvador Blanco.

In this scenario, the president of Caja Rural del Sur expressed the aforementioned desire to remember that “in Germany there are more than 700 credit cooperatives, reaching a market share of almost 30 percent.” In addition, “entities such as the Rabobank in the Netherlands, the DZB Bank in Germany or the Credit Agricole in France are a very clear example of a cooperative, private and orderly bank, which is supported by their governments”.

Therefore, and “with the premise of always looking for alliances” that make them more solid, the Spanish credit cooperatives advance “in joint collaboration”, maintaining their “independence, but, at the same time”, combine “resources and knowledge” to continue betting on the development of our society, through the constant improvement of our services, paying a great attention to the needs of our partners and customers “.

In this context, according to García-Palacios, the entities associated with the National Union of Credit Unions (Unacc) have average total assets (ATM) “of almost 100,000 million euros, loans and deposits worth more than 130,000 million, a net balance of more than 455 million, six million customers and some 700,000 members “, as well as” capital, reserves and sufficient equity to occupy positions of reference among the most solvent entities “in the country.

In the specific case of Caja Rural del Sur, his dedication and way of working with the principles of cooperativism, always thinking of his partners and clients, has led him to be “the second rural cashier in Spain, the fourth credit union and the sixth financial institution in the country in terms of strength and economic solvency “, and this because it” penalizes the size and qualification of the State “.

Specifically, as detailed by its president, Caja Rural del Sur has “with almost 140,000 members, more than 1,100 employees, more than 830,000 customers and just over 330 offices spread across the five provinces” where it has presence, “demonstrating a closeness, capillarity and knowledge of the incomparable environment “.

At the national level, Caja Rural del Sur, as recalled, is integrated into the Caja Rural Group, and are currently “in the final process of establishing an Institutional Protection Mechanism (IPM), recently endorsed at the General Assembly of the Association Spanish Rural Savings Banks (AECR) “, pointing out García-Palacios that,” through the MIP “they create” a guarantee fund that will allow “the rural savings banks to self-manage” duly and to go in support “of” sister entities, in the supposed case of need of support before any contingency “.

But the question, as stressed by the president of Caja Rural del Sur, is that “no rural cash in Spain has needed any help from public funds in the crisis suffered for about ten years, nor would we have to do so in the future, because we apply the principle of prudence and we shield ourselves in this sense “.

“FIVE BIG BANKS”

In any case, the crisis has affected the Spanish financial system, since, according to the president of Caja Rural del Sur, “currently 72 percent of the Spanish financial market share is in the hands of five large banks.”

This, as he has argued, “can have a clear improvement in competitiveness, where the client / consumer can opt for better opportunities in this crazy race to get the client.”

“But it also has another reading,” he continued, “the systemic risk”, because “so much concentration is not given in any European country”, although “perhaps Holland resembles something, but we are not Dutch in thought, nor in customs , nor in a productive model “, while” there are two left of the old savings banks “.

On the other hand, credit cooperatives have almost “doubled” the financial market in Spain, since they already have “six percent in loans and eight percent in deposits”, although they have also reduced the number of entities, “through mergers of mutual interest, as is the case of Caja Rural del Sur,” taking advantage of the opportunity to organize “new and properly, without the need for a single public euro,” he insisted.

In the European Union (EU), both before the crisis and now, “the percentages are distinctly different”, because, as indicated by García-Palacios, “banking occupies 70 percent, credit cooperatives 28 percent and the rest is divided between a figure similar to the savings banks and the new ‘fintech’, approximately. “

NOTICE ABOUT ‘FINTECH’

Precisely, the ‘fintech’ have been, as he recalled, “the last to arrive, swarming over the Internet and come to be some 1,500 virtual entities, of which 60 percent, more or less, are subject to certain regulation”, while the rest submits “to little more than having a license to operate virtually”, so he has wished that “San Pedro blesses” the “people who happen to work” with the ‘fintech’.

These, as noted, in addition to using “the jargon of the new generations, the ‘Millenian’ or even the ‘Generation Z’, allude to kind designations that attract the unwary, as that of collaborative economy”, without fall into the account those who go to the ‘fintech’ that after them “there are only headaches”, in addition to “little responsibility and response.”

In this sense, the president of Caja Rural del Sur has said that “God wants the famous ‘bitcoins’ to remain alone in that, in famous,” because “we have been shown, time and again, that there is no order some, chaos awaits us at the door.”

Cyprus expropriates the savings, the first European playpen. Should we have a boring financial system?

Cyprus expropriates the savings, the first European playpen. Should we have a boring financial system?

Ulrich Beck wondered, what would happen if the European Union asked for membership in the European Union? Nor would he take the trouble to examine the proposal. It does not meet all the conditions it demands of the member states. The question, after what happened in Cyprus, who should stop being part of the European Union?

What happened, in the words of Luis de Guindos, is that the Eurogroup has imposed a tax on depositors of savers. What does it mean in practical terms? “Deposits below 100,000 euros are sacred …” is a metaphor. If someone in Cyprus asked for a small loan for their business, they will discover that part of their money has evaporated. It is not preferential, nor how many term, nor structured insurance, the guarantees of sacred savings has jumped through the air.

Heiner Flassbeck , the former Secretary of State for the Economy (SPD) in Germany more than a decade ago and current director of UNCTAD, calls it expropriating citizens’ savings, a measure that he describes as brutal. It will not solve the euro crisis and has introduced arbitrariness and insecurity in the banking system. The eurogroup punishes the Cypriots for having the money in the bank and not in the mattress.

Throw the stone and hide the hands.

The decision has destroyed at a stroke the confidence in the banking system in southern Europe. Was it malice or stupidity? The presidency of the Eurogroup, in a communiqué, indicates that by “unanimity” was supported the proposal of confiscation of savings in Cyprus.

Then everything is denied. Wolfgang Schäubler rejected that the proposal was German, Sigmar Gabriel, president of the SPD, reminded him that it bears the signature of Germany: “small savers are made to pay so that the banks go unpunished”. And Angela Merkel adds that it has made it possible for a country with a million inhabitants to suffer, to have plunged all of Europe into chaos. “

Not all are calm waters in the SPD. Martin Schulz , president of the European Parliament of the SPD, which he described as a “socially acceptable solution”. In the parliamentary group opened fire those who qualify the decision of “brazen political error.” Peter Steinbrück , his uncomfortable candidates, could not think of anything else to put more constraints on Cyprus.

Towards a transfer union or domestic banks.

The nein, nein, nein of Angela Merkel is misinterpreted. It opposes rescuing creditors, even if it is the German bank itself, with taxpayers’ money. The chief economist of Deutsche Bank, David Folkert-Landau , argued in favor of involving creditors and shareholders: “we must seize the opportunity to discipline the financial market … creditors of banks must assume their responsibilities before taxpayers.” He agrees with Joerg Asmussen, member of the Executive Board of the ECB, who maintained his position as Secretary of State for the Economy with Wolfgang Schäuble and Peer Steinbrück, neither a liberal nor a Keynesian, is a mainstream economist who considers that “the ECB should only provide emergency liquidity to solvent banks … their task is not to lend money from taxpayers to banks”.

An election measure by Angela Merkel , six months before the election, would not give the sick banks more liquidity? Citizens do not like to see how private debts are socialized -4.6 billion according to the president of the commission have gone to banks. The conditions of access to the European Stability Mechanism are to set conditions for governments to finance banks with public debt. What is the alternative? creation of a European Financial Stability Fund capitalized by the banks themselves through one after the financial transactions. The tobi rate. The difficulty is that the authority will supervise the banks of the European Union. The European Central Bank after mistakes ended up adopting a political role in Cyprus. He has exercised authority without actually applying.

Who wants the banking union?

There is a European bank but a banking nationalism prevails. The deposit guarantee is national while the bank plays with European rules. Absurd. Who does not want, no longer the banking union, but a European supervisory authority? The risk systems of European banks are addressed from methodological nationalism, as risks that will not obtain the exit visa.

Cyprus’s 70% of GDP comes from the money laundering business, as evidenced by the amount of money from non-residents. And not only Russians. Nobody remembers that in the G20 of 2008 it was proposed to burn the tax havens. The government of Cyprus wanted to avoid at all costs that those non-residents paid more than 10% – here the absurd 9.9%. Preserve your business model, which incidentally, Cyprus is a sink compared to Luxembourg, a global washing machine.

The Economic Council of the German government proposed a banking union with a deposit insurance throughout Europe, with a common authority that, as noted, allows the risks to be distributed between banks that are already European and not “national” (http: // www. .voxeu.org / article / internal-market-banking-union-proposal-german-council-economic-experts – written by Peter Bofinge and others).

What happened? After a decade of financial deregulation, savers have become, without knowing it or asking for it, in speculators. The line between savings and investment banking disappeared. What allowed converting all citizen investors.

The European Central Bank, thanks to the political clumsiness of the Eurogroup, ended up betraying its own foundations and slipped into politicized decisions. Mario Draghi who opposed the eurobono, the banking union, etc., now acts as a part-time revolutionary, makes proposals, unthinkable a few months ago, since the reform of the financial system, common guarantee funds, European authority. Can Cyprus be the trigger to stop being proposed part-time?

Pending task of domestic banking.

Luis Linde , governor of the Bank of Spain, accepted the European conditions: “if a bank is not sufficiently solid to guarantee its future it must be dissolved or liquidated”. Minister Luis de Guindos denied that any bank would be liquidated. Will we get into debt by saving bankrupt banks? Neither Cyprus, nor Greece, nor Spain have asked for the ransom. Banking nationalism prevents us from coming out of the crisis, asking questions within the nation state.

It is not the taxpayers who must pay for the broken dishes of the bank but the European bank itself. Sigmar Gabriel , president of the SPD, accepted to vote the last rescue to Greece, which supposed to socialize private debt in public debt, but demanded to accelerate the banking union. Neither the timid reforms proposed by Sigmar Gabriel , summarized as “the banks are boring again” found followers. The guarantee fund must be European, the rescue to the bank must have a Financial Stability Fund from a rate on transactions. Angela Merkel has integrated these proposals; in February it proposed that the destruction of someone else’s money is a crime and, more importantly, divide the banks, including the Deutsche Bank , into a savings and investment bank -the latter if it is not solvent to liquidate their assets.

The Minister of Economy of Cyprus, Mijalis Sarris , is more willing to travel to Moscow than to Brussels. Does not Moscow demand so many guarantees? Do you prefer the Moscow doctrine of liquidating the guaranteed savings to save investment banking? It seems that Cyprus fooled with playing with its gas, that the Russians aspire to a Bolshevik Europe. While Europe was showing signs of losing the compass of its interests for a problem in Cyprus, with the size of a medium-sized city. The road to elections in September promises to be a roller coaster. A time of fright awaits us.