The bank contemplates that the State enters the capital of the companies to guarantee its solvency
Many turbulent months are ahead for the banking sector. The president of the Spanish Banking Association (AEB) it is clear that we are heading towards a scenario with more difficulties and where the increase in defaults it will be a constant. Especially after summer, they are expected solvency tensions in companies, especially in those whose business model has radically changed. To try to get ahead of the situation and protect as many companies as possible, banks believe that more will be needed financial measures it is not just the free disposal of liquidity, as is currently being done through ICO credits.
Liberal orthodoxy has been blown up by this crisis and the recipes it mentions José María Roldán, president of the banking association, are a good example: «Other European countries consider the implementation of other types of mechanisms, subsidies, capital, subordinated debt, hybrids of capital, we must reflect on this and make an assessment. See if we should implement other instruments and it will be at the turn of the summer when something has to be done, “said the representative of the banks at a meeting to present to the press the results of the banking sector in 2019, after the assembly of its AEB entity.
Roldán made this intervention before the press after participating in the meeting with the banking entities associated with the employers.
Banks believe that in the current situation of tension, they cannot be left alone, financing all companies
Although there are several recipes that Roldán has placed on the table and all involve a greater action of the State, it is undoubtedly the possibility that the Administration enters directly into the shareholders of the companies which is the most novel. Market sources have pointed out that what banks believe is that, in the current situation of tension, they cannot be left alone giving financing to all companies, but that other instruments will be required.
For example, in Germany and Italy there are complementary measures that have to do with the coverage of losses and the financing of lost funds, which would amount to a subsidy for them. With respect to the possibility of entering directly into the capital of the companies, it is pointed out that it would not be exactly a nationalization but “enter temporarily”.
Therefore these two possibilities, which are to acquire temporarily capital or give subsidies to cover losses, they will be taken into account to suggest them to the Government for the coming months. At the AEB, it is believed that the situation is very changing and that there will be no absolute visibility of how the pandemic affects the health of companies until the end of this exercise and the beginning of the next, that is, in six months.
Danger with Podemos
This message from banks currently contrasts with the most common opinions of bank managers, more against public intervention in companies. In case of Bankia is paradigmatic of a financial entity with public participation (more than 60% of its capital through the FROB), although in this case the State opted after appointing the entity to appoint a banker of proven experience (José Ignacio Goirigolzarri) and practice the Isse laissez faire ’ with the entity, which for all purposes is managed as a private bank despite being public.
However, the arrival of Podemos to the Government together with the Socialist Party changes the chips on the board, since the vice president Pablo Iglesias He has already shown on numerous occasions that he would like to intervene extensively in many economic sectors, even practicing the expropriation or nationalization of companies. The banking, electricity or even industrial companies like Nissan have been mentioned by Iglesias as possible meat of nationalization.
Furthermore, the ideological closeness of Unidas Podemos with movements such as the Venezuelan chavismo, which have practiced for years the expropriation of companies with disastrous results, would generate insecurity as this same government is the one that makes decisions to enter companies that need it.
Example from France
Not far from here, the French model has specialized in this type of state intervention in companies, especially large ones, for years. Paris is a shareholder partner of strategic multinationals from all sectors such as Renault and PSA (cars), Electricité de France (EDF, energy), ADP (infrastructure), Airbus and Air France-KLM (aviation) u Orange (telecommunications). Only in the months of April and May, the French State has carried out different financial support operations for all these companies.
However, the public participation in private companies in France it is done professionally and under market criteria, something that would remain in doubt in a government ideologically led by Vice President Iglesias.