…consider the grim fact that even €100 billion may not be enough to put Spain’s banks back on their feet, as they could easily face losses of perhaps three times that amount: Real-estate loans amount to €298 billion, construction credit to €98 billion, mortgages to €656 billion and other loans for families and firms to €683 billion. Assuming a 50% loss in real-estate and construction loans, a 5% loss in mortgages and 10% loss in other credits to the national private sector, brings us quickly to the worrying figure of €300 billion in losses. And don’t forget the banks’ additional exposure of €78 billion to Portugal and €10 billion to Greece and Ireland, which could add losses of between €40 billion or more to our calculation.
Spanish banks currently report total equity of €377 billion, so losses on this scale would leave them with just €50 billion to €70 billion remaining in equity. To bring them back to reasonably levels of capital would then require €150 billion to €170 billion—well above the €100 billion line of credit… [‘Bail-in’ Spain’s banks, not bailout. Juan Ramón Rallo. Wall Street Journal. June 18 2012]
No wonder yields on Spanish sovereign debt are going up, regardless of Greece.
One reply on “[2560] Scary quote of the day”
It’s throwing good money after bad.
Never realised it until recently but the difference in work ethics and cultures across the continent is making the Euro more untenable than ever before.
Why didn’t anyone see this 30 years ago?