The Bank of Spain has planned to submit national lenders to new tests in light of the effects of the sovereign debt crisis and a pending recession. According to various financial sources, the BOS will demand extensive reports from lenders in October. The Bank of Spain will use the figures they collect in order to determine each lender's capital requirements, decide whether their liquidity has improved or worsened with respect to the latest figures, and act accordingly.
Reports will include information on the lenders' current state of affairs and business plans for fiscal year 2012.
Spanish lenders have never been asked for such detailed reports. In the past, they have sent little more than a short note about their status and upcoming projects.
The Bank of Spain will use the figures they collect in order to determine each lender's capital requirements, decide whether their liquidity has improved or worsened with respect to the latest figures, and act accordingly. The initiative is part of the stability program established by the Ecofin last week, for which European authorities approved a plan to accelerate recapitalization of the banking sector and improve the number of groups that will be required to submit to stress tests.
Looking at current data, the supervisor of the Bank of Spain will calculate if the lenders can enter 2012 on their own or if they will need further assistance from the government or some form of merger.
Why Ordóñez is worried
Governor Miguel Ángel Fernández Ordóñez and his team are mostly preoccupied with liquidity shortages due to closings among the biggest markets and a palpable risk of contagion should Greece fail. They are also preparing for a broader crisis during which employment would continue to rise and the economy would remain flat.
