Bank of Spain says savings banks restructuring is best solution

The decision to impose a radical restructuring of ailing savings banks as a precondition for financial support was the right way to proceed, Miguel Fernández Ordóñez, Banco de España governor, said on Monday (23 May).

“If more capital had been injected in the savings banks without making this help conditional on an inevitably longer, more risky and complicated restructuring process, it would not have solved our problems,” Ordóñez said in a speech at a conference in Madrid.

Unlike in other countries which found themselves facing the collapse of their major banks, the Spanish banking system’s problems were limited to only one part of the savings bank sector. Not all savings banks were affected and many savings banks are as solid as the banks, he said.

It is to be hoped that the restructuring of the savings banks sector will be completed according to the parliament’s wishes, Ordóñez said. He warned that the FROB, the special restructuring fund established to help resolve the banking crisis, would intervene and sell institutions that failed to carry out approved restructuring plans.

There had been “much noise” complaining about the reforms, but the alternative of providing financial aid without conditions and an agreement on restructuring would not have been viable, he said.

The reforms will take time and effort. “It is obvious that a plan of this breadth and complexity will not allow us to overcome all difficulties overnight,” he warned. But once completed, the reforms will benefit the banking sector for many years, he said.

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