Credit Suisse storm complicates creation of “bad bank” for bad debt in Spain

It is yet another “victim” – albeit very indirect – of the crisis that shook the financial sector last week, with the collapse of Silicon Valley Bank and the immense pressure on Credit Suisse. The new climate of uncertainty has already “braked” – but not stopped – the intention of the four largest Spanish banks – Santander, BBVA, Caixabank and Sabadell – to jointly create a “bad bank” to manage non-performing corporate loans.

These four banking institutions have been holding meetings in recent months with a view to being able to combine portfolios of non-performing loans to companies in a single vehicle, in order to speed up their restructuring. According to the Spanish economist Cinco Días, the last of these technical meetings took place this Friday, precisely when the ceiling seemed to collapse on top of Credit Suisse.

Credit Suisse Status. A rush to Monday morning to calm markets

Sources with knowledge of the process cited by the Spanish newspaper indicate that the new scenario that scares the financial sector will certainly complicate the launch of a new vehicle for this purpose. But there was no clear indication from the meeting that the project will be scrapped (nor that it will be accelerated).

Bank sources (Santander has a division in Portugal; Caixabank is BPI’s main shareholder; BBVA and Sabadell both have operations in our country) revealed that a pilot test had already been carried out with client companies of the four to test The operation. The objective is to have a mechanism that allows managing the complicated debt of companies in view of the forecast of an increase in the number of non-performing loans in 2023.

The intention has two aspects: on the one hand, to make banks have to set up fewer provisions and, on the other hand, to avoid the bankruptcy of companies by not carrying out the credit restructurings that they need in time. The project foresees that the four banks will be able to transfer portfolios of loans to companies to the “bad bank”, but with a special focus on loans to SMEs, since sector forecasts indicate that it will be in this segment that more companies will start to leave to be able to pay off your debt.

The sources of Cinco Días point out that this is a project still in the process of being matured, which in order to come to fruition will necessarily have to have the consent of the Bank of Spain and the Spanish Ministry of Economy.