Spanish Government’s Bank Reconstruction Plan

Spanish Government's Bank Reconstruction Plan

 

For some background, links to two European newspapers on the topic here and here.

This Tiger Cub Giant Is Betting On Banks And Tech Stocks In The Recovery

D1 CapitalThe first two months of the third quarter were the best months for D1 Capital Partners' public portfolio since inception, that's according to a copy of the firm's August update, which ValueWalk has been able to review. Q2 2020 hedge fund letters, conferences and more According to the update, D1's public portfolio returned 20.1% gross Read More


The reconstruction of the Spanish banking sector addresses the construction and housing sector alone. Total loans to this sector are 304 bio. EUR. With the additional demanded 28 bio. EUR the total impairment is 137 bio. EUR. It is not so much a law as a decree.
1) Two independent companies audit the valuation of the loans and properties on the banks books.
2) The banks are obligated to create real estate companies, where to real estate loans to developers will be transferred.
3) The provisions should be as follows:
a. Toxic loans (loans in default) will need a 50 bio. EUR.
b. Loans were in February to be reserved with 7% or 9 bio. EUR as provisions in the February regulation were insufficient. The IMF has indicated that a number of these loans had been hidden (f.i. by paying interest through raising principal). This has now been raised to 30%.
i. Loans to building plots are impaired changed from 7% to 52%. 25 bio. EUR.
ii. Buildings under construction from 7% to 29%. 16 bio. EUR.
iii. Finished dwellings from 7% to 14%. 61 bio. EUR.
iv. Loans with no real security from 7% to 52%. 18 bio. EUR.
4) A month of grace for each financial institution to present a plan on how to comply with the decree.
a. If equity is lost there must be a plan on how to raise new capital within 5 months.
b. The plan must be approved by the CB of Spain within 15 days and may request public money if necessary to avoid a merger.
c. Merger plans must be forwarded to the Ministry of Economic at June 30th at the latest.