Rescue of the Spanish bank for dummies

I want to briefly comment on my vision about the future rescue of the Spanish or Spanish banks I still do not have it clear, without first putting a touch of attention that in the economy, politics and financial markets talking about what is going to happen is really difficult now that we actually know that we are bad but we do not know how bad we really are or will be, let me explain, 20,000 million were needed for Bankia, then Caixa Galicia leaves and then Caja tal and Caja Cual will leave the Banco del Norte and Banco del Sur already that if you help one you have to help all.

Result, 100,000 million are needed (it will be to put a figure) since currently we have not yet heard anything about an audit that companies sent from European entities were going to carry out to check the current balance of our banking, that is, we do not know how much we need if we know what they are going to give us.

Brussels (always Brussels) has offered Spain a financial rescue program for its "credit institutions", that is, more money for the banks since some of them will be rescued. What will it be? In reality they will receive a loan so that they can be re-capitalized because the State does not have the capacity to provide all the money they need to clean them up. They are currently in a bankrupt theory, aren't they? Citizens need to know who is in bankruptcy? And why ?, since as always they will be the ones who will pay for the broken dishes of this rescue in the form of:

  • VAT increase,
  • Budget cuts,
  • Retirement date extension,
  • and a long etc that Brussels (always Brussels) will indicate to us regardless of the party that governs, this is clear to us.

This rain of millions for better or for worse will be reflected in the daily life of Spanish citizens. But how will the bailout affect your savings, taxes or credits? We will explain in our own way how this fact can influence us. What can happen to our savings?

Rejoice, in theory worse than they are can not be. If the bank needs a rescue and is in bankruptcy, currently its deposits are affected , no one says it but in theory it is so. It is curious that they teach us to save and invest but they do not teach us to manage ourselves. If I owe a thousand and I have to ask for fifteen hundred to cover those thousand and have five hundred to work again, that's it. Until they give me those fifteen hundred I'm KO.

But this is my theoretical reality, the true reality or what the experts tell us today is the following:

If you have your money deposited in a bank you can rest easy. The aid from Brussels, the European Central Bank and other European entities to the Spanish financial institutions most affected by the crisis will mean a reinforcement of their capital structure.

In this way, customer deposits will be secured. In addition, European aid will place Spanish financial institutions among the most capitalized in the world, that is, we are in luck we will go from poor to rich in a jiffy . With this injection of money, the Deposit Guarantee Fund reinforces its position: it guarantees 100,000 euros for each deposit, that is, if you have 500,000 euros it only guarantees you 100,000 euros, currently without the rescue I had understood that the 100,000 were guaranteed, it seems that We do not need that money for the FGD (I do not say it, I say it Brussels).

What happens to the shareholders of the bank?

Today, if you are already a user-level investor with no privileged information and advised by the press or your bank manager, you must be sorry for having invested in shares of your bank since most of them have had losses and will leave. holding until no one knows when.

But the future theory says the following: If you are a shareholder of a financial institution, you will obtain less profitability . Among the conditions that the European institutions will impose on the rescued banks and savings banks is the reduction of dividends on profit (that does not affect the majority). One of the demands of Brussels to grant the aid is to lower the salary of executives and control the salary bonuses to the directors of the entities that receive financial aid. In addition, public control over institutions with public money will be strengthened.

This theory is incredible, Brussels will demand that we lower the salaries of executives who have brought companies (in this case banks) to the top level and who, because of the crisis and poor management, are in theoretical ruin. But is this true? I, Brussels, put them out of work, which is in fashion and put 8-year-old children as administrators who the most they ask for is a pack of stickers.

What will happen to the entities that are rescued?

I believe that we should exclude from this group the entities Santander, BBVA and some others , which have declared that they will not participate in this injection of money, so the users of these entities are in theoretical margin.

The Government has admitted that “financial support” from Brussels to Spanish financial institutions would entail financial conditions only for entities that receive aid. What conditions? Are they already known before the rescue?

The sector discounts that it will have to tackle a new internal restructuring process that could lead to the closure of offices and the reduction of staff .

My question is the following within my ignorance, why are their balances not closed and liquidated, passing the deposits to stronger entities? Why keep Savings Banks and Banks in theoretical bankruptcy?

What will it mean for the Spanish?

The aid of up to 100,000 million euros to clean up the Spanish financial sector will increase pressure on Spain's budgetary targets (deficit and debt targets). The Government has negotiated doggedly so that the conditions required by Brussels in exchange for the ransom are limited exclusively to banking, but the aid will entail new fiscal consolidation measures. Translated: more cuts and new tax increases.

That is, because of the rescue we will be much poorer and it will make us think that Spain will be at 1956 levels (to say one year). We only have one hope and that is that with everything that has happened, the Spaniards are an incredible people, not even God will destroy them and we will surely succeed.

"There will be no new macroeconomic conditions or new fiscal conditions," said the Minister of Economy , Luis de Guindos, that is to say in Roman paladino so that we understand "there will be new conditions that Brussels will impose on us and that we are going to pay more than the price." The interest on the credit provided by Brussels will have to be paid by the Government and that will raise the public deficit, which will entail further adjustments. In addition, in its latest recommendations, Brussels advised raising the collection of

l Value added tax VAT and those linked to the environment. It is certain that once you deliver aid, you will toughen your stance on these conditions. Among them is delaying the retirement age or eliminating the home purchase deduction, there will be many more that we do not know for sure. Will the credit begin to be activated? Let's see, we get into the matter. We know through the press that one of the objectives of the Government when requesting the financial rescue is to inject money into the system.

That is, it will be to a certain part of the system, in theory the other part does not need a credit injection. Why does the party that in theory does not need a rescue not have the credit activated in this situation?

From the Executive they hope that after a few weeks since the financial entities receive the aid, it is foreseeable that they will begin to circulate the credit improving the financing of companies and citizens. How deluded, Brussels will give us money to start spending it as we know, airports that are not used, AVE for everyone, subsidies here and there. City councils and councils with pharaonic works and everything without their supervision, excuse my irony but I don't believe anything.

In this way it will be easier for entities to grant loans again. “The ultimate reason. There is no other reason, it is to have solvent entities so that they can give loans to SMEs and Spanish families ”, Guindos has riveted.

Will the price of flats go down?

This is the workhorse of the housing bubble crisis. I always say that everything has been a bubble. Since we have accepted the Euro as the single currency in less than 3 years since 2003, prices related to basic consumption have tripled. Products such as bread and milk have had an increase of more than 50% of their original price, not to say that gasoline has doubled its price with what this entails. Who has actually been the bubble that has caused all this?

The banks and savings banks that receive help will have to clean up their balance sheets, weighed down by assets linked to the real estate sector. I have always been struck by how easy it is to blame things that cannot be defended. We know the assets they have in the real estate sector but we do not know the assets that private companies owe in the form of promissory notes, checks, the public sectors in the form of grants and loans. To give an example, if a simple city council of 3000 inhabitants in Guadalajara owes 16 million euros (read the following link ), what should not be there? But of course the fault lies with the housing bubble and its flats.

The banks will recognize all the loss of value of their portfolio of houses and of the credits and loans to the developers. Translated: they are expected to lower the price of real estate, which had not experienced all the decline in other countries. However, one of the recommendations of Brussels to the Government consists in the abolition of the deduction for home acquisition , if this is your recommendation, what will Brussels know what is going on here?

What floors will go down, the second-hand ones, the new ones, the ones that are empty of promotions and bank constructions?

The only ones that currently have an overvalued price after their construction are the promotions carried out from 2006 until the burst of the bubble. These should lower their price to real levels, that is, approximately 35% of their sale value.

Second-hand homes will have to adjust their price to the reality of their value, that is, not be equated with the prices of new construction although in reality I think that these will be less affected since their need for sale may not be so necessary like the ballast that banks have with promotions.

New builders are brave as they will be stuck with existing developments, difficult financing, and competition in the sale, so good luck to them for years to come.

Prices are always set by supply and demand, in some places there will be little supply and enough demand to balance the balance. I do not think that in Marbella, central Madrid, Barcelona, ​​Ibiza, Mallorca, Bilbao, A Coruña and other capital centers prices are lowered in such a way that we can all access them. If this were the case, Spain would be a colony of Chinese, Russians or any country that wants to live well at a low price.

The future looks dark but if it is clear, it is that in SEattle Meditation you will find one of the largest databases of properties without loads on the market. Unless the real estate market falls to 35% of the total value of the property, which I do not believe, your investments will always be safe.

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