Capital Markets

Mnuchin expected to be Trump’s Treasury secretary

Donald Trump has chosen Steven Mnuchin as his Treasury secretary, US media outlets reported on Tuesday, positioning the former Goldman Sachs banker to be the latest Wall Street veteran to receive a top administration post. Mr Mnuchin chairs both Dune Capital Management and Dune Entertainment Partners and has been a longtime business associate of Mr […]

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Financial system more vulnerable after Trump victory, says BoE

The US election outcome has “reinforced existing vulnerabilities” in the financial system, the Bank of England has warned, adding that the outlook for financial stability in the UK remains challenging. The BoE said on Wednesday that vulnerabilities that were already considered “elevated” have worsened since its last report on financial stability in July, in the […]

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Zoopla wins back customers from online property rival

Zoopla chief executive Alex Chesterman has branded rival OnTheMarket “a failed experiment”, and said that his property site was winning back customers at a record rate. OnTheMarket was set up last year, aiming to compete with Zoopla and Rightmove, the UK’s two biggest property portals. It allowed estate agents to list their properties more cheaply […]

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Hard-hit online lender CAN Capital makes executive changes

The biggest online lender to small businesses in the US has pulled down the shutters and put its top managers on a leave of absence, in the latest blow to an industry grappling with mounting fears over credit quality. Atlanta-based CAN Capital said on Tuesday that it had replaced a trio of senior executives, after […]

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BoE stress tests: all you need to know

The Bank of England has released the results of its latest round of its annual banking stress tests and its semi-annual financial stability report this morning. Used to measure the resilience of a bank’s balance sheet in adverse scenarios, the stress tests measured the impact of a severe slowdown in Chinese growth, a global recession […]

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Categorized | Economy

Scepticism greets Spain’s plans for banks

Posted on April 30, 2012

The Spanish government’s reappraisal of plans to establish a state-organised vehicle to hive off troubled bank assets has been met with scepticism from analysts as Madrid faced a fresh credit rating downgrade of its lenders.

Standard & Poor’s, the US rating agency which last week cut Spain’s sovereign credit rating, on Monday downgraded 11 of the country’s largest banks, placing Madrid’s struggle with how it will clean up the sector under further scrutiny as economists argue an additional €100bn could be required.

    Mariano Rajoy’s government, after floating and then scrapping the idea of a so-called “bad bank” when first elected, has begun again to discuss the possibility of placing problematic property loans into one or more specialised asset management companies, officials have said.

    While no further details have emerged of the structure of such a troubled asset fund, officials have been at pains to stress that the term “bad bank” is a misnomer, as no state money would be used like in other examples seen in Europe.

    Analysts, however, have been quick to point out that any scheme that did not use additional capital, either from the Spanish state or from international sources, would struggle to achieve its goal of clearing vast inventories of bad property assets from bank balance sheets.

    This is because, while Ireland’s NAMA used state money to take assets from banks at a discount, a Spanish equivalent which did not use state money would struggle to enforce the writedowns required – as to do so would risk forcing the weakest lenders into needing vast amounts of additional capital.

    “If the idea is to avoid the ignominy of an IMF bailout, then without an alternative funding source this is pure fantasy,” said James Ferguson of Westhouse Securities. “The proposal seems to illustrate just how absent of ideas the Spanish authorities have become.”

    Gary Jenkins of Swordfish Research noted that funding any bad bank-style entity, and valuing the assets transferred to it from lenders, would be challenging.

    Madrid remains insistent that no international bailout of its banks will be needed, and that banks would only be allowed to place bad assets into a separate state vehicle if they had already set aside provisions for them, and had their values independently verified.

    While aggressive writedowns of assets would be unlikely, a possible benefit of the scheme, officials say, is that banks would be relieved of the pressure of selling the homes they have repossessed and could instead refocus on lending to small and medium businesses.

    The reappraisal of a bad asset scheme for banks follows a warning from the International Monetary Fund last week over the risks that some Spanish banks still posed to the country’s financial stability, with the fund singling out Bankia, the largest lender to receive state aid, as the biggest problem in the sector.

    The IMF also recommended that some form of separate state-backed vehicle should be created to split away bad assets and allow banks to begin lending again into a credit-starved economy.