Spain Banking System

pain’s banking system
Teetering
Spain has avoided facing up to its banking problems. Now it has no choice
Jun 2nd 2012 | MADRID | from the print edition


IN THE weeks before its listing lastsummer, Bankia inundated airwaves, bus stops and newspapers with an advertising campaign that invited viewers to buy shares and become a bankero. If the campaign was jarring back then, it now seemsalmost grotesque. On May 26th Spain’s fourth-largest bank requested a €19 billion ($24 billion) bail-out from the state. Like it or not, every Spanish taxpayer is now a bankero. What’s more, the scale ofthe cleanup at Bankia raises fears that other lenders will require more cash at a time when there is no obvious way of raising it.

The good news is that the larger-than-expected rescue means thegovernment is at last serious about cleaning up Bankia. Its new chairman, José Ignacio Goirigolzarri, certainly has every incentive to flush out all the bank’s problems so that the balance-sheet ispurged of nasties. Bankia’s recently nationalised parent, Banco Financiero y de Ahorros (BFA), will get €19 billion on top of the €4.5 billion it had already received from Spain’s bail-out fund, theFROB. The new provisions go beyond recent state requirements and will cover nearly half of the group’s real-estate exposure, and 13.1% of its entire loan book.

In this section
»Teetering
The fearfactor
A contrarian moment
VC clone home
You get who you pay for
Tentative steps
Very personal finance
Going, going, gone?
Silicon sally
Correction: International banking
Vacancy
ReprintsRelated topics
Economic policy
Financial rescue plans
Spain
Existing shareholders will see their 55% stake in Bankia heavily diluted. Although they will have the right to participate in Bankia’s €12billion capital increase in October, which will be underwritten by BFA, it is pretty unlikely that anyone will take up those rights (Bankia’s shares have fallen by more than 70% since it listed). The...