Spanish banks have 'no liquidity problem', says Treasury minister
SPAIN’S banks are well-funded for at least the next two years and do not have a "liquidity problem", Treasury minister Inigo Fernandez de Mesa said, after 16 of the country's lenders had their credit ratings cut last night.
"Spanish banks have plenty of liquidity. They've been funded for the next two years through the central bank so there's no problem of liquidity at all in Spain," Mr Fernandez de Mesa told the BBC this morning.
"We have had two LTR's from the European Central Bank so they are funded for the next two years."
He said the recent fears around the health of the country's banks were linked to their exposure to the property market.
Moody's last night cut the ratings of 16 Spanish banks, citing the reduced ability of the Spanish government to provide support to the sector, as well as the "adverse operating conditions" characterised by a renewed recession.
Mr Fernandez de Mesa also sought to reassure shareholders and customer of Bankia, which has suffered a massive fall in its shares this week after reports that depositors had withdrawn €1bn since the bank had to be part-nationalised last week.
"Bankia is now in the hands of the public sector so it's pretty safe," he said. "We have to distinguish between shareholders and depositors. Depositors are very confident on the future of Bankia."
Bankia's shares have rallied almost 20pc today, despite the downgrade last night. Other Spanish bank shares are also now trading higher despite falling immediately after the market opened.
Reports this morning said the Spanish government has hired Goldman Sachs to carry out an independent valuation of Bankia.
The newspaper Expansion said that the investement bank will review Bankia's and its parent company BFA's books and determine within a month how much the state should inject to refloat the lender, which had to be rescued after its auditor, Deloitte, identified several gaps in last year's accounts.
Madrid last week ordered Spain's key financial institutions to raise provisions against toxic property loans from 7pc to 30pc, as part of its fourth attempt to shore up the stricken sector since the Spanish property bubble burst.
The move will provide an extra €30bn cash cushion to ward against tumbling property prices. The measures will take total provisions against real estate assets to €137bn or 45pc of the banks' portfolios.
Banks were also told to separate their real-estate loans from the rest of their assets in a further effort to ring-fence the problem area.
Mr Fernandez de Mesa also defended Spain efforts to improve its public finances and said the government does not need any financial assistance from the rest of the EU.
"Our level of debt is very low compared to the euro area average. We're pretty confident in ourselves," he said. "We're very aware of the difficulties of Spain and we're taking the right measures to overcome the imbalances in the Spanish economy."