MADRID (MNI) – The banking system of economically beleaguered Spain
is solid and in good health, European Central Bank Governing Council
member Miguel Fernandez Ordonez said Friday.
Speaking at a press conference about the bank stress tests
published today, the head of the Bank of Spain, which is the country’s
banking supervisor, emphasized what he considered to be the exacting
nature of the tests.
“The Spanish banking system, the financial system are solid,” he
repeated again and again.
Despite the failure of five Spanish institutions to meet the
minimum 6% Tier 1 capital ratio in the event of the adverse scenario and
sovereign shock hypothesized by the tests, Spain’s banks in general
“enjoy absolute good health,” he maintained.
Ordonez pointed repeatedly to the conditions of the stress test, in
particular the very large price declines assumed to occur in the real
estate sector and the 2.6% GDP slump from 2010 to 2011.
This is a “highly improbable” scenario, which is precisely what
makes the stress test results credible and in the long term an
undoubtedly valuable exercise, he said.
“Some day the economy is going to grow again,” Ordonez added.
Ordonez noted as well the haircuts insisted on by the ECB for
Spain’s sovereign debt, which were double the average level in the
Eurozone.
More generally, “the Eurozone has changed fundamentally since
April,” he posited, pointing to a range of developments including the
reform efforts of the EU Council and Greece’s attempts to get its
situation fiscal house back in order.
Banks’ liquidity problems “come from doubts about solvency” and
have been countered ably by the ECB, he said. However, these measures
“should be temporary” as the markets must be made to function.
–Frankfurt bureau tel.: +49-69-720142. Email: frankfurt@marketnews.com
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