Spanish Economy Minister Luis de Guindos rejected the creation of a state-sponsored “bad bank” to unload real-estate assets from the nation’s cash-strapped lenders.
Instead, de Guindos said lenders should move real estate assets into separate “entities” or create “securitized assets” for which they have already set aside provisions so that distressed properties can be more easily valued and sold.
“The government won’t create anything, neither a good bank nor a bad bank and there won’t even be the smallest bit of public money available,” de Guindos told reporters in Washington today. “What we have is a process of adjustment in the valuation of the assets, and that in turn should help their sale.”
Spain is trying to restore investor confidence in its banking system amid concern the nation’s real-estate collapse will overburden public finances. The European Union said April 19 that Spain doesn’t need to seek help in re-capitalizing its banks and that the country doesn’t plan to tap rescue funds.
In a presentation to analysts in London, Jose Maria Roldan, head of banking regulation at the Bank of Spain, raised the possibility of lenders separating bad assets into different vehicles once losses have been recognized and written down.
De Guindos said in February that banks would have until the end of May to present merger plans that would give them two years instead of one to make additional provisions for real estate losses on their balance sheets.
Prime Minister Mariano Rajoy, in power since December, pledged a “true restructuring” of the industry at no cost to the taxpayer four years after the decade-long property boom collapsed.
In November, Rajoy asked for at least two papers from academics on how to create a bad bank, according to two people with knowledge of the matter who declined be named because the process isn’t public.
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