(The author is a Reuters Breakingviews columnist. The opinions
expressed are his own.)
By George Hay
LONDON, Dec 20 (Reuters Breakingviews) - Spain’s exit plan
for its worst banks looks better than the UK’s. Madrid’s
confirmation on Dec. 20 of a further 1.9 billion euros for
Caja3, Banco Mare Nostrum, Banco Ceiss and Liberbank brings the
country’s total bank bailout costs to almost 39 billion euros.
But setting a deadline for returning the banks to the private
sector is the right move.
When Royal Bank of Scotland (RBS.L) and Lloyds Banking Group
(LLOY.L) were semi-nationalised in 2008, the UK government
outsourced the business of selling down its stake to an “arm’s
length” body, UK Financial Investments. Its remit was to sell by
maximising value, not by a certain time. In contrast, the
Spanish equivalent, the Fund for Orderly Bank Restructuring, is
legally forced to sell or list its new bank stakes by 2017.
That might seem pointlessly constrictive. The Spanish
economy is in recession and sustainable growth may be way off.
Meanwhile, news that foreign investors like Deutsche Bank
(DBKGn.DE) have invested in Sareb, Spain’s new “bad bank” for
toxic property loans, doesn’t mean investors have become
optimistic: the minimal sums being invested signal that foreign
banks with branch networks in Spain just want to keep their
regulator on side. If the economy was still wheezing in 2016,
Spain would be forced to sell its lenders at knockdown prices.
Yet Madrid has chosen the right option. The law compelling
the FROB to sell hasn’t been imposed by the European Commission.
If they absolutely had to, Spanish legislators could change it.
Certainty of exit has benefits. When and how RBS will be
returned to the private sector has become a political football
kicked in different directions by UK leaders, depending on the
shifting public mood. Any administration selling out at a loss
will be accused of wasting public money. Legitimate arguments
for getting the banks back in the private sector, even at a
loss, thus become inaudible. In giving investors a firm
deadline, Madrid has also given them a better idea of when its
maligned banking sector will have to get back in shape again.
SIGN UP FOR BREAKINGVIEWS EMAIL ALERTS:
- The European Commission said on Dec. 20 that it had
approved restructuring plans for Caja3, Banco Mare Nostrum,
Banco Ceiss and Liberbank. The four lenders will collectively
receive 1.87 billion euros in new capital.
- The amount is less than the shortfall recorded for these
so-called “Group 2” banks by Oliver Wyman, the consultant, in
its recent stress test of the Spanish banking sector, partly
because problem assets have been transferred to Sareb, the
Spanish bad bank, and partly because the creditors of Group 2
have had their debt bailed in.
- Overall, banks have now received 38.8 billion euros,
compared to 52.5 billion identified in the Oliver Wyman stress
- Banco Mare Nostrum will be majority-owned by Spain’s Fund
for Orderly Bank Restructuring (FROB), but it is planned to list
the shares before the end of 2017.
- Bank of Spain release, Dec. 20: link.reuters.com/byv74t
- Reuters: EU approves second phase of Spain's banking
- For previous columns by the author, Reuters customers can
click on [HAY/]
(Editing by Pierre Briançon and Sarah Bailey)
Keywords: BREAKINGVIEWS SPAIN/BANKS/
(C) Reuters 2012. All rights reserved. Republication or redistribution of
Reuters content, including by caching, framing, or similar means, is
expressly prohibited without the prior written consent of Reuters. Reuters
and the Reuters sphere logo are registered trademarks and trademarks of
the Reuters group of companies around the world.