Economics & Finance
May Wed 23, 2012
After the "bank runs" that occurred in Greece, on Thursday news went around that customers of Bankia, the Spanish bank that was partially nationalized last week, would withdraw more than a billion euros of deposits. "No one knows exactly what is happening”, explains Mikel Buesa Blanco, Professor of Applied Economics at the Complutense University of Madrid, “because the figures on the deposits have been discredited. However, in other previous cases of intervention to save financial institutions, there have been significant withdrawals by customers, so it is very likely that in the case of Bankia the same thing will happen". Could you tell us about the situation at Bankia? Why did the government have to intervene to save it?Bankia is the result of the merger of several savings banks, each with problems arising from the excessive risk on loans granted to the real estate sector in the past, in the time of the "euphoria of the brick," or the real estate boom, which happened mainly between 2004 and 2007. These assets, when the prices began to collapse, were not devaluated in the balance sheets of the financial institutions because the government of Zapatero, in 2008, exempted them from the obligation of doing so. The result was that credit losses were accumulated without the necessary measures being taken to cover them, and now the situation has become untenable. In fact, without the intervention of the State, Bankia would fail, taking with it much of the Spanish banking system. The nationalization was therefore inevitable.What is the situation of the Spanish banking system in general like?In the Spanish banking system, there are two types of situations. On the one hand, the traditional banks (such as Santander, BBVA and others) are entities with a certain level of risk in the real estate sector with guaranteed coverage. They have no solvency problems. The same applies to Caixa Bank (which comes from an old savings bank), to the segment of the rural banks (that are cooperative entities) and to some traditional savings banks (Ibercaja, Unicaja BBK Kutxa and Caja Vital). On the other hand, there are banks formed by a merger of former savings banks, which in most cases have serious solvency problems. They are the institutions that between 2000 and 2007 funded the housing bubble. Bankia is the best known example, but there are others that the Bank of Spain is intervening to save. It is unlikely that this segment will survive.So the Ltro interventions of the ECB were not enough to secure the system?
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