This is the economic news of the day , the 32 conditions that Brussels imposes on Spain in exchange for the financial rescue, if you want to know what the rescue is and what it consists of, we recommend that you read this other post that we publish "Rescue of the Spanish Bank for dummies ” .
- Limits on the dividends of the entities rescued,
- branch and staff cuts,
- limits on executive salaries and
- loss of powers to the Government for the benefit of the Bank of Spain.
Brussels will impose on Spain some thirty conditions in exchange for the financial rescue, all of them included in the Memorandum of Understanding agreed between the European Union and the Government for the recapitalization of the financial system.
The measures, which will be imposed on the banks that require the rescue, have already been agreed and will be definitively fixed on the 20th of this month with the signing of the aforementioned memorandum.
According to a copy of the draft that Reuters has had access to, among the required conditions is that Spain must “prepare by the end of November 2012 legislation that clarifies the role of savings banks in their role as shareholders of credit institutions with the idea of eventually reducing their holdings to non-controlling positions ”.
Spanish savings banks could be forced to undo their controlling positions in Spanish commercial banks , according to the draft of the Memorandum of Understanding (MoU).
In any case, Spain must offer a roadmap before December 2012 in order for the financial entities that have received aid to go public.
After nine hours of negotiation, the Eurozone Economy Ministers reached a "political agreement" on the conditions of the bank rescue early Tuesday morning. Thus, Spain will have at its disposal 30,000 million before the end of July but both the entities and the Government will have to comply with the conditions imposed.
The government loses powers
The Executive will lose powers over the financial sector, since according to the MoU the Spanish authorities undertake to give a more prominent role to the Bank of Spain , establishing new legislation that transfers the sanctioning and licensing power to Spanish banks . Ultimately, the Executive must reinforce the operational independence of the body.
Banks that receive aid will also have to transfer their problem assets to a liquidation company, cut branches and staff, sell industrial shares and non-strategic assets, they will not be able to pay dividends and they will have to limit the salary of their executives .
Likewise, those investors who have hybrid securities and subordinated debt of the banks that receive aid must bear a reduction in the value of their shares.
As part of the agreement with Europe, the Spanish Government also undertakes to report, on a weekly basis, on the level of bank deposits and the liquidity position of entities and, every three months, on the level of sovereign debt held by banks in their wallets.
Source: The Economist
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