So we guarantee that Bankia goes bust again then?

Spain may recapitalise Bankia with Spanish government bonds in return for shares in the bank which last week asked for rescue funding of €19bn, a government source has told Reuters.

The bank still has to mark that paper to market and as Spanish bonds are going to fall in value with the inevitable upcoming default (negotiated or not) then they\’ve just set up Bankia to default once again, haven\’t they?

12 thoughts on “So we guarantee that Bankia goes bust again then?”

  1. Maybe Spain will default (maybe?).

    I wonder how it will be structured. Bankia should get the cash. Goirigolzarri is nobody’s fool. He has already upset the left by saying that Bankia ain’t giving anything back as the government is taking a capital stake.

    He meant of course that his job was to make the 19bn worth 25bn and for the state to make a profit when it disinvests.

  2. So Much For Subtlety

    Ambrose Evens-Pritchard says five Spanish banks have been down graded to junk by Standard and Poors. Anyone know which ones?

    I also think he does a great job of summing up the problems with Spanish banks:

    A €4bn bail-out in mid-May. A €23bn bail-out two weeks later. You couldn’t make it up.

    So an audit found they needed 4 billion only for them to double check a fortnight later and discover they needed 6 times as much? Spanish made be suited for talking to God, but it is clearly not suited to basic mathematics.

    I have moved beyond Spain. Transcended as it were. Now I am watching Soc-Gen with some interest. As I know people with their cash therein, when is a good time to go beyond strong urging into full blown panic?

  3. SMFS: Bankia, Banco Popular, Bankinter, Banca Civica and Banco Financiero y de Ahoorro. This Internet thing is *awesome*, you should try it.

    AEP isn’t doing anything to challenge my general view that someone who says “you couldn’t make it up” is a lazy hack who at the very least is drifting into “make it up” territory…

  4. So Much For Subtlety

    Frances Coppola – “It’s a French bank. I’d suggest June 18th.”

    So it will be a race then – if they can hold out long enough that all the relevant French people will have gone on their summer holidays, they may be able to weather the storm. Or at least it will all be over one way or another by the time everyone is back.

    So the question is when do French financial markets go on holiday?

    June 18th? I would give them a chance then.

    5 john b – “This Internet thing is *awesome*, you should try it.”

    I am still struggling with the implications of the telegraph. I notice someone paid almost a billion euros for one of those banks on March 26th. I bet they are feeling stupid now.

    “AEP isn’t doing anything to challenge my general view that someone who says “you couldn’t make it up” is a lazy hack who at the very least is drifting into “make it up” territory…”

    Yeah but he has been great on the euro crisis so far. The best coverage I have seen has been his in the Telly. Which is, admittedly, not hard as the Times is behind a pay-wall I can’t be bothered with and the Guardian and the Indie can’t be trusted to wrap chips.

  5. Hmm. I’ve been following the FT’s reporting, their generalist hacks, the Alphaville blog, and Munchau’s columns. At which point, the ignorant gibbering of all the UK tabloids (Tele, Times, Indy and Graun included, although Tele and Indy are usually the worse due to sheer lack of resources) becomes noise-best-avoided.

    As far as Pritchard goes in particular, if you shout “EUROPE IS DOOMED” every ten minutes for 20 years, and then something bad happens to Europe, that doesn’t demonstrate your AMAZING SKILLS.

  6. This posting made me feel sad. Because I read it, and when I got to the “nineteen billion” figure, my reflexive thought was “is that all?”. Like 19 bn is peanuts. 19,000,000,000 Euros these days seems like spare change, in the context of the figures we routinely read, ten billion here, a hundred billion there. Isn’t that sad?

  7. Isn’t the idea that Bankia will sell the Spanish Government Bonds to the ECB?

    Tim adds: No, they can’t do that. However, what they can do is lend them to the ECB as collateral and get cash back for them. But the risk of capital value changes stays with the banks. So if Spain defaults, the banks all go bust as they now owe lots to the ECB and the collateral has fallen in value.

  8. Offshore Observer

    Ian B I agree absolutely. In the past 5 years I have starting thinking in £billions in an offhand manner. For example I read somewhere that FATCA was expected to raise about $8Billion for the USA and thought to myself “all that trouble for $8B”. In reality £8Billion is an astonishing amount of money. 19B Euro’s is a massive pile of cash and then you think about the LTRO with more than Euro 1 Trillion which rolls of the tongue easily but is a ridiculous sum of money but yet isn’t quite enough to solve the problems.

    when 1 trillion isn’t enough to stop panic then we really are in a very large pile of shit.

    All very depressing. Still the sun is shining so hey ho

  9. SMFS

    No, you’re not quite getting it. French banks have the most exposure to Greece and are very poorly capitalised. The outcome of the Greek elections is therefore crucial to your decision. Hence June 18th.

Leave a Reply

Your email address will not be published. Required fields are marked *