Bloomberg News

Spanish Banks May Face PP Drive to Spur Asset Sales, Nadal Says

October 25, 2011

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Oct. 26 (Bloomberg) -- A People’s Party government may seek to change Spain’s accounting rules to encourage banks to sell assets, write off loans that won’t be repaid and bolster transparency, the party’s economy secretary, Alvaro Nadal, said.

The PP, which polls indicate will win a majority in elections on Nov. 20, wants to tackle the “uncertainty about what’s in the balance sheets” of banks, Nadal said in an interview at the opposition party’s headquarters in Madrid yesterday.

“Regulatory orders and changes in the way book-keeping is done in the financial sector could be some help in the case of certain assets,” he said. “What we will tell the Bank of Spain and other regulation agencies is that we have to push in this direction and we have to put assets in the market to show the real price of those assets.”

Spanish lenders, which have made provisions of 105 billion euros ($146 billion) since the collapse of a property boom in 2008, are facing a surge in funding costs amid concerns about real-estate losses and the sovereign debt crisis. The Bank of Spain has already tightened rules to make lenders set aside more reserves against the real estate they took onto their books in exchange for unpaid debts.

“Those liabilities that are going to be recovered will be recovered, those that need a writedown will have a writedown and those that need a write-off will have a write-off, but that’s the kind of thing we have to do,” Nadal said. “We haven’t been transparent enough.”

Public money would only be used to bolster capital as a “last resort,” he said.

Bailout Fund

Spain’s bank-bailout fund took over three lenders on Sept. 30, valuing them at zero to 12 percent of book value, and Bank of Spain Governor Miguel Angel Fernandez Ordonez said the overhaul of the industry was complete after 45 savings banks merged into 15 and lenders increased capital levels. The fund is using 7.55 billion euros of public money in the latest round of recapitalization, after spending about 10 billion euros buying preference shares in a first attempt to bolster savings banks.

The PP may also offer tax rebates on “long-term savings” similar to existing deductions for cash invested in pension funds, and real-estate investments should enjoy similar advantages, Nadal said. Investment rebates could be offered “when things settle down,” he said.

“One of the long-term problems we have always had is a lack of national savings,” he said. “So, if you save, you pay less taxes, so long as it’s long-term investment, and real estate is one of them.”

The PP is set to win the largest majority since 1982 in the general election on Nov. 20, opinion polls show. The PP may gain 194 of the 350 seats in Parliament, compared with 119 for the ruling Socialists, a poll by El Mundo showed on Oct. 23.

--With assistance from Charles Penty in Madrid. Editors: Craig Stirling, Eddie Buckle

bbva@sm san@sm bto@sm cabk@sm pop@sm pas@sm bkia@sm bciv@sm

To contact the reporters on this story: Emma Ross-Thomas in Madrid at erossthomas@bloomberg.net; Angeline Benoit in Madrid at abenoit4@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net


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