Bank Of Spain Tells Lenders To Take 30% Loss Provisions On Foreclosed Real Estate Held For Over Two Years

Tyler Durden's picture

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homersimpson's picture

Funny - as soon as this story popped on ZH, the DJI started to tank. Spooky.

knukles's picture

Here here!

Doing exactly what is necessary.  Recognize the losses, take the pain, write it down, impair capital and start afresh.

This is what Japan and the US have NOT done...thereby creating a veritable Zombie Banking system.  And don't have to look any further whatsoever than the Japanese experience to see its impact on the economy.

Cheers for the Spaniards with respect to this one decision.  Betcha the rest of EU doesn't follow, for the impairment of deeply entrenched political motivations will not allow the Power Elite to in essence, Admit thier faults of the Past and Move Forward.  

(Continued to take inventory and when we were wrong admitted it.) 

heyligen's picture

Admit our Faults? recognize our losses? What the Fed are you talking about?

M.B. Drapier's picture

It's certainly progress. But after Ireland's experience with the NAMA real-estate writedown program, my gut feeling is that these writedowns may turn out to be well short of the real losses.

Traianus Augustus's picture

US banks beaten to the punch again.  I guess they can follow Spain's lead...but they will have to wait until after next quarter years earnings season...

SheepDog-One's picture

What IS 'the real value of real estate'...simply what someone else is willing to pay for it! Time to deflate this world real estate bubble, its ridiculous.

SayTabserb's picture

Odd that the country which gave us tilting at windmills should prove so realistic. Shouldn't we lend them our FASB rules so they can avoid this depressing act of realism? How do you say "extend and pretend" en Espahnyol?

SheepDog-One's picture

All along, all of this printed trillions in stimulus and bailout nonsense has been about this exact thing, refusal of banks to recognize their 'assets' are hyperinflated in valuation! You have to take your losses Wall St sooner or later, because Im sure as hell not going to make up the difference for you!

mikla's picture

We now know what happened:  Conspiracies are too hard to keep going when you keep adding people.

Central banks the world over agreed to defraud their people and print, swallowing and hiding toxic crap from their taxpaying servitude morts.  That is, it was a great plan until you start getting banks that won't play ball.

Of course, the Bank of Spain is in the EU and theoretically can't print overtly.  That's a problem too.  And, officials in Spain know the potential rioters will actually kill the central planners.  That could be considered intimidating to the elites against participating in fraud a-step-too-far.

Who would have thought the fear of the populace would hold the overlords accountable?  Weird.

vote_libertarian_party's picture

Wasn't there a call for a nationwide strike in June for Spain?  Maybe the gvt is trying to prove to it's people "Listen, we have to make major changes, see how bad our banking situation is."

Zeroexperience2010's picture

there is one for Italy, don't know about Spain...

GoldBricker's picture

Maybe also trying to show the markets that it's serious, the way Ireland has done and recently Italy (with its 5% public-pay cut). Better to get out in front of the issue; you'll be unconvincing once you're in a Grecian spiral.

Rogerwilco's picture

People laughed when old man Templeton warned that in a few years they would be able to buy real estate for pennies on the dollar.

101 years and counting's picture

Why doesn't the internation community institute mark to myth accounting?

It has worked so well here.  Banks are making gobs of money, paying themselves hundreds of billions in bonuses, etc.....

Tic tock's picture

That's one central bank that's got stones

carbonmutant's picture

 It'll be interesting to see how successful this plan is.

There are some other countries that could use this model if it works...

RSDallas's picture

They should have started at a 30% haircut and moved from there.  In any event, three cheers for Spain!

Ripped Chunk's picture

Bottom feeders (that want a villa in Spain) unite!!!!

BlackBeard's picture

How do we trade regulators?

Mitchman's picture

Bravo and Ole for Spain!  Tough to believe that their funding costs didn't already reflect what everyone knows about their balance sheets.  

citizen2084's picture

Is this the same Spain that o-bomb-a touted as the economy we should emulate?

So the green economy of the future is not found in Spain? 

My world view is crumbling. My dear leader cannot be wrong.

Mommy, I need my mommy!!

 

 

 

 

b_thunder's picture

What the f*&^%$  are they doing???   30% haircut?  Haven't they heard about "stress test?"  Just do the test, raise a few bucks euros and no more writedowns!  Don't they understand that they MUST keep the bubble going????

 

 

Popo's picture

B..b..but..what about Mark to Magic?

Buck Johnson's picture

Mark to magic, thats a good one.  I don't think Spain and some much of the EU has the ability anymore to keep the game going.  In a ponzi scheme the weakest link is what starts the ball rolling down hill.

M.B. Drapier's picture

a development which will have a major adverse impact on Spain's banking sector once it funnels through the banking system, and especially once the need for liquidity spikes yet none is found

I don't think the ECB is ready to capitulate yet, do you? I wonder if this was co-ordinated in advance with Trichet as part of a confidence-raising manoeuvre, or if Spain is mugging the ECB with a hand-grenade. Of course, if you were to do the latter, you'd first want to merge as many banks as possible, in order to maximise the systemic risk...

Privatus's picture

Hey Reggie! Time to upgrade to an Abramovich-class yacht.

Josephine29's picture

This crisis in Spain seems to go on and on. I was reading about the three new rule changes by the Bank of Spain on the notayesmanseconomics web blog earlier. Added to it is BBVAs failure to renew some 1 billion Euros of commercial paper borrowing in the US and things appear to be deteriorating in Spain...