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. “