The bank run must be larger than they are letting on.
Spanish markets got clubbed today, as PM Mariano Rajoy was announcing a new nationalization scheme for Bankia.
But that was mostly expected.
What freaked out investors was a new report in El Mundo that suggested a new, much-more expensive fire needed to be put out.
In its latest Euro Areas: Sovereign Debt Crisis Update note, Citi summarizes the report:
Reports suggest Spain may need an extra €30bn for banks – Spain may need another €30bn to clean up its banking system on top of the €19bn required by Bankia according to El Mundo. The money would be split along the following lines: €10bn for a balance sheet cleanup and €20bn to raise capital levels, citing
government sources. The newspaper argues that the €30bn would go mainly to CatalunyaCaixa, Novagalicia and Banco de Valencia. The newspaper also quoted government sources suggesting that, should the Greece crisis continue and Spanish 10-yr bond spread remain around 500bps, Spain could seek aid from European funds.
“Bankia Parent Revises 2011 “Profit” Of €41 Million to €3.3 Billion Loss”
Looks like E30Bn won’t even cover 1 bank.
The accounting practices of banks in Spain, Italy, Greece, etc. is what should worry everyone. This problem is so much worse that what is claimed.