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Tuesday, June 19, 2012 3:08 PM

Spanish Banking Audits Delayed Until September, Another €50 Billion Likely Needed

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Via Google Translate from La Vanguardia, please note that Spanish banking audits are delayed until September

Audits of Spanish banks, which should conclude in late July, will be delayed until September in order to get "further examination", as reported by Efe sources close to the process.

The monitoring committee, which includes representatives from the Ministry of Economy and the Bank of Spain, have made this decision in order to have more complete information on the balance of Spanish banks.

PwC, Deloitte, Ernst & Young and KPMG will audit, as part of the second phase of the Government's strategy to dispel doubts about Spanish banks and in a first stage assessment of the consultants Oliver Wyman and Roland Berger , whose results will be announced Thursday.

A month ago, the Ministry of Economy and the Bank of Spain announced that at first these two consultants evaluated the balance sheets of Spanish banks, which was submitted to stress tests to detect the needs of capital.

These results are expected in two days, but the market as a given that the capital they require Spanish financial institutions as a whole will be between 60,000 and 70,000 million.

In addition to this assessment, in a second phase, four auditing firms to be responsible for further evaluation, expected end of July and is now delayed until September.

The audit will serve to contrast the expected losses due to impairment of assets of each bank and that the four companies evaluate loan portfolios of the entities in detail.

Not only real estate loan losses, which is where the government has required greater provisions, but also consumer credit to businesses and families, to refine the necessary write-downs.

That review, experts speculate, could force much of the sector to increase supplies significantly, so that together with the capital needs to be detected in the first phase of the evaluation may lead institutions to take up 150,000 million euros.
Why the Delay?

There is a political need to get the ESM up and running with a lower preliminary figure before the real audit reports a need for capital that exceeds 200% of the preliminary number (€60-70 billion), and €50 billion over the credit line number of €100 billion.

Amsusingly, the ESM has not been ratified by 13 of 17 countries, including Germany, although it has been signed by most countries.

Mike "Mish" Shedlock
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