The Bank of Spain is revising capital requirements for struggling savings banks. This is not surprising given that Ordóñez brought up the intervention on the CAM, whose defaults increased from 4 billion euros to 9 billion euros. A gap like this does not put Ordóñez?s institution in a good place and pushes them to take action more quickly, such that they avoid creating gaps like this for the remaining institutions that they are finding solutions for. Especially now that there are closed off capital markets, an economy in decline, major corrections in the real estate market, 10% solvency requirements to back risky shares.
Truly, the biggest part of the problem has been contained, and we jumped the most difficult hurdle when Bankia had its IPO before the latest stock market debacle. Yesterday, Unicaja absorbed Caja España, which helped the Bank of Spain. The CAM still has five lenders with deficits on their balance sheets. Many of them are expected to ask for more time in order to come up with cash to cover their deficits.
Ordóñez must not grant the extensions, because the cajas are already in a horrible position for attracting investors. The CAM's example confirms that the banks' accounts can deteriorate, for which the governor must act as quickly as possible by pumping in the funds they urgently need. This should be combined with a deep overhaul in order to prevent the recapitalization from falling on deaf ears. We are just starting to clear up doubts that weigh mostly on the financial system.
