A new year has started, but old problems continue to plague the financial sector. They continue amidst widespread doubts about the costs of financing, thinning margins, the need to meet increasingly strict capital requirements imposed by the European Banking Authority and the impact of the European sovereign debt crisis that wages on despite the European Central Bank's efforts.
Yesterday Unicredit offered a 43% discount on a debt issue so that it could raise 7.3 billion euros in capital that it need in order to bolster its reserves for the European Banking Authority. Stock markets, especially the Spanish market, punished this sign of weakness, revealing the sad assumption that other banks could follow in the Unicredit's footsteps.
In order to avoid this situation, major Spanish banks are trying to avoid resorting to raising capital, which the markets perceive as a sign of weakness. The best strategy that our lenders can use to raise funds raises talks about converting preferred stock and paying dividends in shares instead of cash. With this view, it is a good thing that the Spanish government has extended assessments of land plots called suelo urbanizable that are listed on the balance sheets of banks and real estate groups.
With the deferment, the government buys time to define the measures that it will enact on the sector and avoid dealing with accounting firms who have divergent opinions and won't do anything but complicate the grueling path that our banks and savings banks are walking along right now and further hinder access to credit that is necessary in order to increase production and counteract the recession.