Positive Moves on the Banking Front

Doubts remain about the “Bad Bank”


José Luis Suárez

Recent government measures designed to restructure the banking systemhave had a positive impact, reducing the cost of borrowing and opening up finance to Spanish entities. This was the conclusion reached at a Continuous Education session held in Madrid on Wednesday on "The Process of Bank Restructuring." The session was moderated by IESE Prof. José Luis Suárez.

The keynote speech was given by Pablo Campos, managing partner Financial Services at the consultancy Oliver Wyman. He reminded his audience that from 2000 to 2009 there was a rapid expansion of credit in Spain which led to the property bubble. The cost of government borrowing soared and urgent measures needed to be taken. Unfortunately, he said, Spain was slow to react. "We thought the crisis wouldn’t last as long as it did," he said.

Another key factor, Campos said, has been the establishment of Sareb, popularly known as the "bad bank" to which banks could transfer their toxic property assets. So far, however, only the nationalized banks have done so. The transfer will allow banks to focus on their core activities, he said, although there are worries over the limited foreign participation in Sareb’s capital.

Another result of restructuring, Campos said, would be consolidation. "The sector will be more concentrated, with fewer players taking a larger share of the market."