STOCK MARKET WATCH -- Monday, 29 October 2012

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20. IMF asks for non-viable Spanish banks to be wound down

http://elpais.com/elpais/2012/10/26/inenglish/1351269790_765609.html

After a 10-day review in Madrid, the European Commission, the IMF and the European Central Bank (ECB) have given a favorable opinion of the Spanish government’s efforts to clean up the banks that were nationalized in order to save them from going under.

In the next few weeks the amount of funding to be injected into Bankia, Catalunya Banc, NCG Banco, NCG Banco and Banco de Valencia to restore their balance sheets to health will be announced. Spain has signed a memorandum of understanding with its European partners for a bailout of up to 100 billion euros to fund the recapitalization.

An audit by consultant Oliver Wyman estimated the Spanish banking sector will need additional capital of 53.745 billion euros to shore up balance sheets because of its exposure to the moribund real estate sector. Bankia requires 24.743 billion euros, Catalunya Banc 10.825 billion, NCG Banco 7.176 billion for NCG Banco and Banco de Valencia 3.462 billion under an adverse economic scenario.

In a statement issued Friday, the IMF recommended that “non-viable banks [need to be] promptly wound down” in order to ensure the successful clean-up of the financial system.