There has been praise for Spain’s efforts to fix the country’s battered banking system.
The European Commission and the European Central Bank, which are monitoring Madrid’s progress, along with the International Monetary Fund, said the banks do have more reserves, are more solvent and their overhaul is largely on track following the 2008 property crash.
The conclusions come with the latest review that is part of the -so far – 41 billion euro rescue of Spain’s weakest lenders.
“The process of bank restructuring is well underway,” the EC and ECB said in a statement following their third inspection of the sector on a visit from May 21-31.
“Vigilence is required to help ensure these positive trends in the stabilisation of the Spanish banking sector can be maintained.”
But some of the same things that bring protesters out on the streets of Spain also worry the European authorities’ – though for different reasons.
The marchers are angry over austerity, while Brussels and the IMF warn that the crippling recession, the nation’s high debt levels and a sliding property market pose risks to the banking system.
Spain’s economy shrank for the seventh straight quarter in the first three months of this year and is expected to remain in recession into 2014 with over a quarter of the working population out of a job and companies going bankrupt on a daily basis.
Both the European authorities and the IMF said the creation of a ‘bad bank’ to take 51 billion euros worth of toxic property assets out of rescued banks had bolstered solvency in the system, though the entity known as Sareb now faces other risks.
“Sareb now faces the major challenge of successfully managing and eventually divesting the portfolio of assets against a backdrop of the still very difficult market conditions for Spanish real estate,” the EC and the ECB said.
The IMF added that economic risks could be mitigated by timely implementation of the eurozone banking union and the continuation of low interest rates by the European Central Bank and strong financial supervision by Madrid.