- By Region
This week’s stress test of Spanish banks excluded foreign-owned lenders and a few exceptional domestic ones, such as the Banca March, the Majorcan lender that is one of the most strongly capitalised in the world.
One reason is obvious – this exercise is designed to establish the capital needs of Spanish banks in preparation of a European Union bail-out. Foreign banks, such as Barclays, Deutsche Bank and Citigroup, would have no right to such funds, even if they wanted them.
But the truth is that these outposts of British, German and US banks would also have skewed the aggregate figures. Though small compared with the local institutions, they tend to be far better capitalised.
It was not always that way. Rewind a year or so to a period when the Bank of Spain was still lauded by many as a tough, sensible regulator, and was sufficiently trusted to run its own stress tests.
In March 2011, just such an exercise led to significant capital shortfalls identified at three of the main commercial banks. Back then the offenders were not the likes of Bankia or Banco Popular. In fact two of the three – Barclays and Deutsche Bank – were not even Spanish.
The capital requirement – designed to bring the banks up to a core tier one capital ratio of 8 per cent – was the biggest at Barclays, at €552m, compared with €182m for Deutsche Bank. Bankinter was the only Spanish lender with a significant shortfall, of €333m, though all the numbers pale compared with today’s stress test shortfalls and the aggregate total of up to €62bn.
Barclays remains by far the biggest foreign lender in the country, with a balance sheet of about €20bn. Though it cut its branch network from 600 to 500 last year, it has reaffirmed its commitment to the country, hiring a new chief executive in Jaime Echegoyen from Bankinter.