The main finding of the mission is that major progress has been made in implementing financial sector reforms.
The programme remains on track: the clean-up of undercapitalised banks has reached an advanced stage, and key reforms of Spain’s financial sector framework have been either adopted or designed. Indeed, the bulk of all of the measures for the entire programme have now been completed. Going forward, it will be important to maintain this momentum with strong completion of initiated reforms and continued vigilant oversight, as risks to the economy and hence to the financial sector remain elevated as Spain undergoes a difficult process of fiscal and external adjustment.
More specifically, the mission’s preliminary findings include the following:
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On bank recapitalisation: Action is being taken to address banks’ capital shortfalls. This clean-up is a major achievement that should strengthen confidence in the system and improve its ability to support the real economy. Remaining elements of the recapitalisation and burden sharing exercise should be completed in a timely manner and in ways that minimise taxpayer costs.
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On SAREB: Important progress has been made. Key achievements include the establishment of the company, the receipt of real estate-related assets from the weakest banks, and the adoption of strong servicing agreements with participating banks to manage the transferred assets. Going forward, policy priorities to address remaining challenges include the completion of an updated and comprehensive long-term business plan and robust implementation of servicing agreements to safeguard the value of SAREB’s assets.
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On monitoring and maintenance of financial stability: To safeguard the programme’s gains, it will be important to continue closely monitoring the health of the financial system. To facilitate this as well as the forthcoming partial transfer of supervisory powers to the European Central Bank (ECB), specific timelines should be drawn up to implement the Bank of Spain’s recent proposals to strengthen its supervisory procedures.
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On savings bank reform: The draft law to reform the savings bank system is a welcome step aimed at enhancing these banks’ governance and reducing risks to financial stability. It will be important to ensure that the draft law sets effective incentives for former savings banks to gradually divest their controlling stakes in commercial banks.
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On household indebtedness: The IMF welcomes the government’s plan to increase the protection of the most vulnerable mortgage debtors, while maintaining this sector’s historically strong credit discipline.
The third financial sector monitoring mission is expected to take place in the second quarter of 2013.
Full press release
See also Statement by the EC and the ECB following the conclusion of the second review of the financial assistance programme for Spain
© International Monetary Fund
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