Spain says its crisis-torn banks need up to 62 billion euros ($A77.
79 billion) to survive a severe financial slump, far less than the maximum foreseen in a eurozone rescue deal.
It released the results of two independent banking audits just days before it was due to formally request a loan from a credit line of up to 100 billion euros offered by the eurozone for Spanish banks hammered by a 2008 property market crash.
The audits, one by the German firm Roland Berger, the other from the US firm Oliver Wyman, tested 14 top banking groups in a likely “baseline” scenario and a “stressed” outcome of a slumping economy and real estate sector.
They found that in a stressed scenario lasting three years, the banks would need 51-62 billion euros in extra capital.
In a baseline case they would need just 16-26 billion euros.
“I am wondering really whether markets are going to find these figures sufficiently credible,” said Edward Hugh, an independent economist based in Barcelona.
“Markets are going to wonder, especially if we are looking at a three-year term, whether this has gone far enough.”
On the eve of the audit’s release, Fitch Ratings had said it estimated the Spanish banks’ capital needs at 50-60 billion euros in a base case and 90-100 billion euros in a scenario similar to the Irish crisis.
Fitch, however, said it did not actually expect Spanish banks’ credit losses to be as high as those in Ireland.
Bank of Spain deputy governor Fernando Restoy said the audits indicated that problems were limited to banks that were already being helped and that the rescue loan would be sufficient.
“The agreed figure of 100 billion euros gives us ample margin,” he said.
“The largest entities in the country do not need need additional capital,” he added.
The stressed scenario assumed a 6.5 per cent slump in activity, a 26.4 per cent dive in home prices and an 85-90 per cent collapse in land prices over the three years, Restoy said.
But a look at the details showed some leeway was given.
Under the baseline scenario, for example, the jobless rate – already at 24.4 per cent in the first quarter of 2012 – is assumed to be just 23.8 per cent this year and 23.5 per cent next year.
Even in the high stress scenario the jobless rate edges up only to 25.0 per cent this year, and 26.8 per cent in 2013.
Both scenarios expect the worst of the recession over within two years. In the base case, there is a recovery with the economy growing of 0.3 per cent in 2014 and in the stressed scenario it contracts 0.3 per cent in the same year.
The audits, a key stage in the costly restructuring of Spanish banks brought on by the 2008 slump, were released at a time when Spain is under intense scrutiny by global financial markets.
Spain managed to raise 2.22 billion euros in an auction of two-, three- and five year bonds hours before the audit, beating its own target with demand outstripping supply by more than three times.
But it had to pay soaring rates to lure investors.
For two-year bonds, for example, the yield more than doubled to 4.706 per cent from 2.069 per cent at the last comparable sale March 1, a sign of deep misgivings about Spain’s near-term prospects.