The Bank of Spain will decide at the end of October if it will request an extension to the bailout terms for recapitalizing national banks. The term currently expires on December 31, 2013. Bank of Spain governor Luis María Linde has doubted whether the institution can meet these terms for a while, and the Ministry of the Economy also expressed its concerns on this matter last May.
A combination of developments in the Spanish economy, how refinancing work has been dealt with on bank balance sheets, the sale of Cataluyna Banc and NCG Banco and banking sector stress tests could require the banks to increase their capital requirements.
Too many roadblocks like this could induce the government to use a line of credit to recapitalize the weakest banks. This step would prolong the sector's recovery and keep credit from reaching citizens and businesses for even longer.
