Spain’s banks have a combined capital shortfall of 59.3 billion euros ($76.3 billion), according to a stress test designed to remove doubts about a financial industry pummeled by real estate losses.
The Bankia group, a nationalized lender, had a 24.7 billion-euro capital deficit in the tests conducted by management consultants Oliver Wyman that also showed Banco Popular Espanol SA had a 3.22 billion-euro shortfall. The stress tests of 14 lenders showed no capital deficit for seven banks, including Banco Santander SA, Banco Bilbao Vizcaya Argentaria SA and Banco Sabadell SA.
Spain commissioned the independent stress test as part of the conditions agreed in July for a European bailout of as much as 100 billion euros for its banking system, which has been saddled with more than 180 billion euros of losses linked to souring real estate assets. The attempt to show how its banks would bear an extreme scenario in which the economy would shrink for three years in a row is part of the government’s drive to show it is fixing Spain’s economy as it considers whether to seek a further rescue package from Europe.
“These are important stepping stones on the way for Spain,” said Holger Schmieding, chief economist at Berenberg Bank in London, referring to the stress test. Even so, “there will always be people in the market who question the numbers,” he said.
A preliminary stress test in June by Oliver Wyman and Roland Berger Strategy Consultants showed Spanish banks would need as much as 62 billion euros of additional capital in a worst-case economic scenario.