Friday, February 03, 2012

SOME NEEDED -though maybe insufficient- moves by the Spanish government to fix the banking mess:

Spain’s new conservative government on Friday imposed sweeping new rules it hopes will flush out bad property loans and foreclosed property from the financial system, restore confidence in banks and set the ailing economy back on track toward recovery.

The regulations approved by the Cabinet require banks to set aside an estimated €50 billion ($65 billion) more in provisions to cover toxic real estate assets by the end of the year.

Those unable to do so can present merger plans by the end of May and get government assistance from an existing bailout fund that will be strengthened with an addition €6 billion.

To avoid being forced to raise so much money for the real estate provisions, banks will face enormous pressure to sell assets like land and foreclosed or unsold homes at lower market prices.

The aim is to keep them from hoarding the loans and property on their balance sheets, a practice which has already sapped strength from the banking system and the country’s finances overall for years.