BANKING IN SPAIN - ARE THE SPANISH BANKS OUT OF THEIR DEPTH?
I have just been sent an hilarious article by a Spanish lawyer friend of mine concerning banks in Spain and some advice given awhile back by the Ministry of the Economy of the Spanish government. If you can read Spanish then have a look at this article.
However, if you cannot read Spanish then let me give you a very rough gist of the article which should make you either breakdown in tears of laughter – or sobs of despair!
Incidentally, I am highlighting this article as it rather happily follows on from a recent Post of mine concerning the General Election in Spain coming up in November this year and the mea culpa of Alfredo Rubalcaba (the next leader of the PSOE socialist party). Anyway, overall the article says:
The Spanish Ministry of the Economy has finally got around to issuing some advice to banks in Spain – after the property bubble. They have said that Spanish banks should exercise greater rigour when it comes to providing finance!
The article writer responds to this advice with a rather wonderful: ¡A buenas horas mangas verdes! which could best be stated as: ‘Talk about closing the stable door after the horse has bolted!
Evidently, the Spanish government has said that banks in Spain should now study carefully the overall solvency of a borrower, the stability of their income, if they can pay should they retire and whether there are any doubts about their capacity to pay if the interest rate goes up.
Furthermore, banks should use independent valuers to value a property rather than their own valuers when it comes to mortgages. The writer points out (with great and justified sarcasm) that this advice may have been more helpful during the past decade when the property bubble was actually occurring!
The Spanish government also advises banks in Spain to provide a mortgage on the basis of the ability of the borrowers true capability to pay the mortgage concerned rather than just on the value of the property.
The writer finishes by caustically saying that whilst the advice provided by the Spanish government to banks in Spain, in theory, should prevent a further property bubble he doubts that the banks in Spain will have learnt their lessons – when the next cycle of double digit growth starts.
Wonderful stuff – you have to giggle or, as I said earlier, cry!
In short, finally, in the depths of this devastating economic crisis in Spain the Spanish government got round to issuing some advice and guidance to the financial institutions! It is incredible – and just shows how appalling has been the gross mismanagement of the Spanish economy by the present government in Spain.
What, you have to ask, was the Spanish government under Zapatero doing during the Spanish property bubble when the Spanish banks were, literally (and obviously) frenzied in their lunatic lending of money to anyone and everyone for (just about) anything?
Well, clearly the Spanish government did nothing! Absolutely nothing – not even the provision of the advice just issued now. The result, of course, has been a totally predictable Spanish boom and bust.
Of course, the final ‘rub’ to the recent advice by the Spanish government to the banks in Spain is that (debatably) this is the time when banks should be encouraged to lend so that some liquidity reaches the general marketplace in Spain. However, no doubt that advice will be provided a few years after Spain has passed into the next boom – albeit one that appears long distant…
Nick Snelling – Culture Spain
USEFUL INFORMATION ABOUT FINANCIAL SERVICES SPAIN
Currency transfer and Exchange
FURTHER RELEVANT ARTICLES ABOUT THE SPANISH ECONOMY AND BANKS IN SPAIN
Banks in Spain – is the truth finally coming out
Banks in Spain, how safe are they?
Spanish Property Crash and the Spanish Banks
The Spanish Economy – Unemployment Up Again
The Spanish Property Market 2011 – the Spanish Property Crash is Not Over Yet
Nick
I think one could slot a country of one’s choice every time ‘Spain’ crops up in your piece. Maybe Germany and one or two other northern european countries are exempt but most certainly not UK.
And substitute ‘Blair’ and ‘Brown’ for every mention of Zap. The so-called ‘Iron Chancellor’ was nothing of the sort. The country was presented with the image of the rock of Scottish granite, all jutting jaw and ‘wee Kirk’ frugality – remember ‘Prudence’? – when in fact he’d sent a note round to all the banks and financial institutions saying, “go for it lads.”
He proceeded to fund Govn’t spending by mortgaging the country’s future. He then sat back and spent the next 10 years drumming his fingernails on his desk, waiting for ‘Toneee’ to give him his turn at being PM.
When I sold my boatyard in 1999 I called a mortgage broker to talk about loan finance. Having weathered the previous recession under draconian conditions from my bank – No o/draft facility. Operate on cleared funds only – I was astonished to be asked, “how much do you want?” I pointed out that at that time, although I had capital I had no income. “Oh, don’t worry about that. No problem. How much do you want?” And they sent me the forms! All I had to do was fill in the amount and sign!
Having learned some hard financial lessons in the previous 7 years, I binned this poisoned chalice.
These people, running the finances of individuals and business, were offered an inch and took many miles. Now we are all swinging by it.
So right, Chris – my Goodness what a mess and what incompetence. I focus, of course, on Spain as that is what this Blog is about but almost everything i write about concerning economics applies equally to a bundle of other countries. Sadly, our own country has shown itself to be (perhaps) the most stupid of all in not leaning the clear and obvious ‘debt’ lessons of the 90s recession…