The Ministry of the Economy confirmed yesterday that Roland Berger and Oliver Wyman were the consultants in charge of reviewing the Spanish banking sector's balance sheets. The firms were selected quickly, but they will have little trouble completing their task by the second week of June. The Bank of Spain contracted them several months ago, together with the fund manager BlackRock, to evaluate the sector's needs. Several weeks ago the trio submitted their findings. Roland Berger says the banks need 30 billion euros, and Oliver Wyman says 50 billion euros. BlackRock cited 100 billion. Reports were completed using data published by the sector at the end of 2011 instead of more robust data that the banks have not released.
Final results await, but no major surprises are expected, because a deep study would require time that the consultants have not had. Budget-stabilizing and labor reforms, which need an adequate environment in order to be successful, are underway. These reforms will fall flat if real estate prices are not fully adjusted and corrected for on bank balance sheets.
The work seems as simple as providing a clear picture of the banks' accounts, but perhaps not given three previous attempts to do so have failed. The resolution to the problem involves pointing the finger at government for wasteful spending and putting heavy pressure on the banks, even though they don't want to face heavy losses. Further, an honest audit could cause Spain's GDP to fall off sharply.
Despite the obvious risks and downsides, the audit results ought to reflect the true state of our banking sector without any sleight of hand. The results ought to include changes that have taken place during the past several months and the full extent of real estate defaults and potential new areas for growth. If in the end the consultants find the same results as before, then we will have to end this tired game of charades. We are hanging from a thread and we can't say yes to any more self-delusions.
