IMF advises shutting down weakest cajas if they can´t run effectively

Yesterday the International Monetary Fund published recommendations from a mission directed by James Daniel. As part of the requirements of Article IV, which governs IMF members, Daniel moved to Spain in the beginning of June to keep a pulse on economic progress there.

The IMF document notes that the financial markets continue to pressure our banking sector and that many international investors remain uncertain that cajas and banks have admitted all losses they realized during the collapse of the Spanish real estate market.

"Although potential capital needs are limited and affect only a few institutions, funding and capital-raising remains more difficult for Spanish banks than for their peers. It also potentially creates a negative feedback loop with sovereign funding conditions," said the IMF.

To face this downward spiral and prevent the situation from becoming more complicated, the IMF says that banks that have no prospect of covering their capital shortfalls from the market should be rapidly restructured or, if not clearly viable, quickly resolved.

If this option is for some reason not viable, the Washington-headquartered organization believes that it would be necessary "to resolve the situation as soon as possible," which would imply a government-sanctioned shutdown.

Edited in English by Brandon Dyches and Jose L. De Haro (joseluisdeharo@eleconomista.es)