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Financial assistance for the recapitalisation of financial institutions in Spain

Financial stability support package for Spain

Spain exited successfully the financial assistance programme for the recapitalisation of financial institutions in January 2014. The programme had been agreed by the Eurogroup in July 2012 for a period of 18 months and provided an external financing by the euro area Member States of up to EUR 100 billion. Eventually, Spain used only close to EUR 38.9 billion for bank recapitalisation, under restructuring and resolution plans approved by the European Commission (EC) under State-aid rules, and around EUR 2.5 billion for capitalising Sareb (the Spanish asset management company). Both the bank-specific conditionality and the horizontal conditionality included in the Memorandum of Understanding (MoU) were fulfilled as scheduled (see below for more details).

After exiting the programme, the monitoring of the Spanish economy and its financial sector continues in the context of the post-programme surveillance (PPS), as foreseen by Art. 14 of two-pack Regulation (EU) N°472/2013. PPS starts automatically after the expiry of the programme and aims at a broad monitoring of the repayment capacity of a country having received financial assistance. PPS is biannual in terms of reporting and missions.

Key elements of the programme for Spain

The July 2012 MoU included both bank-specific conditionality, in line with State aid rules, and horizontal conditionality. Even though the financial assistance was provided for a period of 18 months, the restructuring of the banks receiving public support under the State aid rules is expected to take up to five years.

The bank-specific conditionality had three main components:

  • First, a comprehensive diagnostic as regards the capital needs of individual banks, based on a comprehensive asset quality review and valuation process, and bank-by-bank stress tests.
  • Second, the segregation of impaired assets from the balance sheet of banks receiving public support and their transfer to an external Asset Management Company (Sareb).
  • Third, the recapitalisation and restructuring of viable banks and an orderly resolution of ultimately non-viable banks, with private sector burden-sharing as a prerequisite.

Horizontal conditionality applied to the entire banking sector and included measures aimed, inter alia, at strengthening the regulatory, supervisory and bank resolution frameworks, enhancing the governance structure of savings banks and of commercial banks controlled by them, improving consumer protection legislation as regards the sale by banks of subordinated debt instruments.

The EC, in liaison with the ECB and the European Banking Authority (EBA), verified at quarterly intervals that the policy conditions attached to the financial assistance were fulfilled, through missions and regular reporting by the Spanish authorities. In addition, the IMF supported the implementation and monitoring of the programme with advice and regular reporting.

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