ECFIN: Financial assistance programme for the recapitalisation of financial institutions in Spain. Fifth review - Winter 2014

29 January 2014

The FSP formally concluded after 18 months on 22 January. This final report provides an assessment of the progress during the last phase of the programme implementation, and takes stock of the remaining challenges for the financial sector and the Spanish economy as a whole.

This Fifth Review report provides an assessment of the progress made by Spain with respect to its Financial Assistance Programme for the Recapitalisation of Financial Institutions, based on the findings of a joint European Commission (EC)/European Central Bank (ECB) mission to Madrid during 2-13 December, 2013. The mission considers that the positive assessment of steadfast programme implementation that formed the basis of the Eurogroup statement of 14 November has been maintained through the final review. Spain has pulled back from severe problems in some parts of its banking sector, thanks to its reform and policy actions, with the support of the euro area and broader European initiatives. Nevertheless, the reform agenda of the financial sector needs to continue beyond the finalisation of the programme.

Key findings:

• The stabilisation of Spanish financial markets continued, also bolstered by positive economic news. 

• The solvency position of banks has remained broadly comfortable after the recapitalisation of parts of the banking sector, the transfer of assets to Sareb and overall positive earnings results over 2013 so far.

• The process of restructuring of banks having received State aid continues with the double objective of reaching a balanced and viable asset/liability structure and providing credit to the real economy.

• The broader economic environment has continued to weigh on the banking sector, even if that impact has recently been receding.

• Compliance with the horizontal policy requirements in the Memorandum of Understanding (MoU) is complete. This contributed to a thorough overhaul of the governance, regulatory and supervisory framework of the Spanish banking sector.

• The reform agenda of the financial sector needs to continue in order to consolidate the progress in stabilisation.

• The recent encouraging macro-economic news bear witness of the advancing rebalancing of the Spanish economy and corroborate the expectation of a gradual recovery in activity and of an approaching end to employment destruction.

• Fiscal consolidation and structural reforms need to advance further.

• With the Programme coming to an end in January 2014, the EC, in liaison with the ECB, where indicated, will continue monitoring Spain´s financial sector and the broader economy.

Full paper

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As VP Rehn said on 22.1.14: “The programme has achieved its twin objectives of repairing and reforming the Spanish financial sector, and in so doing, helping to create a sound basis for the economic recovery. These efforts have been carried out alongside major structural reforms aimed at restoring competitiveness, and significant fiscal consolidation to ensure the sustainability of public finances.”

VP Rehn statement

See also: Spanish finance minister pitches a "country on the mend" scenario to MEPs

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