The Spanish banking sector cleanup is in question again. The banks that received bailout funds hold more than 18.5 billion euros in tox assets that are sullying their balance sheets, which result from real estate developer loans worth less than 250,000 property defaults less than 100,000 euros that the bank holds in their possession.
But there has been another calculation error in the reports of how much the banking sector will need, Oliver Wyman quoted the cleanup bill at 60 billion euros in order to provide a good image. As time passed, a report from BlackRock showed that an estimated 100 billion euros of aid were closer to the real figure. The Roubini Institute and other analysts shops like the higher figure better. In addition to the 40 billion euros that the EU, ECB and IMF have loaned Spanish banks, they have also relied on money from the Guaranteed Desposits Fund and from their participation in SAREB, the country's toxic real estate asset fund.
Nobody wants to provide more funds, but it is obvious that, as the IMF warned, the money will be necessary. The Economic Ministry and the Bank of Spain are weighing various posibilities, although nothing looks convincing. Adding more toxic assets to the SAREB fund and using more money from Europe's aid funding still open to the banks will both increase the level of public debt.
Creating a bank holding company of the nationalized banks doesn't make sense and would raise suspicious considering that the Frob already exists. This is one of the reasons that Adolf Todó stepped down from his CEO position at Catalunya Caixa. What the government fears most is that a new wave of doubt will surge if confirmations of poor calculations are true, which would weaken the Spanish banking sector and harm the overall economy.
