Madrid wants to speed up banking sector clean-up

"Hurry up with the ‘bad bank’” saysCinco Días. The creation of a structure for the toxic assets of the Spanish banks, mainly related to real estate investments, was ordered by the Eurogroup on July 20as a condition of allowing Spain access to a €100 billion bank bailout fund. But the complexity of the project threatens to delay its implementation, due by the end of August, notes the business daily.

The Spanish government has sent a draft of the decree creating the “bad bank” to Brussels and is dealing with banks in Spain to speed up the process of transferring assets once the new structure is created.

Madrid wants to create its “bad bank” more quickly than the two years it took Ireland to create its toxic asset institution. "The effort to document [all the data on bank assets] now demanded by the governor of the Bank of Spain, Luis Maria Linde, could drastically change these estimates," said La Vanguardia. According to the Spanish auditors’ association, the four audited banks — Bankia, Novagalicia, Catalunya Caixa and Banco de Valencia — have accumulated real estate worth €67 billion and these toxic assets could be ready to be transferred to the “bad bank” in around three months.

Meanwhile The Daily Telegraphreports that Spanish commercial banks saw €74bn withdrawn during July, according to data from the European Central Bank. This is twice the previous monthly record. The daily added –

It is unclear how much of the deposit loss is capital flight, either to German banks or other safe-haven assets such as London property. The Bank of Spain said the fall is distorted by the July effect of tax payments and by the expiry of securitised funds.