Fitch says market still sceptical on Spanish banks

Credit assessor Fitch Ratings welcomed Tuesday tighter new rules on Spanish banks’ balance sheets but said investors remain sceptical about the full extent of the bad loans.

Spain’s 17 regional savings banks, known as cajas, are under pressure to find more cash from investors as Madrid seeks to stamp out fears of an Irish-style EU-backed bailout.

The government approved last month stricter rules on the amount of rock-solid core capital held banks, weighed down by loans that turned sour after the collapse of a Spanish housing bubble in 2008.

“The recently legislated minimum capital requirements for Spanish banks, which will be closely monitored by the Bank of Spain, are an important step forward for the sector,” Fitch said in a report.

Under the new rules, savings banks must raise the proportion of core capital they hold to 10 percent of total assets from the current six percent.

If they cannot raise the extra capital from private investors, the savings banks must transform themselves into classic banks so as to allow the state to take a temporary stake.

Some of the Spanish savings banks already comply with the 10 percent rule, Fitch said.

But a small number of the weaker banks may need to access money through the state-backed Fund for Orderly Banking Restructuring if they are unable to attract outside investors, it said.

“Given the uncertainties remaining in the valuation of real-estate assets and Spain’s low growth prospects, both factors likely to place pressure on profitability, Fitch expects third-party investors to be highly selective and only likely to enter institutions that have sound fundamentals,” it warned.

Fitch welcomed the Bank of Spain’s decision to publish more data on savings banks’ doubtful laons to the construction and real-estate sectors, estimated at 100 billion euros.

“These transparency measures and higher capital requirements could help to ease investor concerns, although the market still remains sceptical about the depth of asset quality issues,” Fitch said.