Spain Needs $78B for Financial System to Stay Solvent - Consultants
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"The banks in Spain collapse gently under strain." - Unknown
Numbers are in from two consulting firms hired by Spain to evaluate the capital requirements needed for the country's banks to remain solvent. Initial results are a little daunting.
First, firm Oliver Wyman said the Spanish financial system would need between €51 billion and €62 billion (about $78 billion) should the country's GDP shrink by 6.5 percent and house prices fall 60 percent for their peak.
The other firm, Rolan Berger Strategy Consultants, appeared a little more bullish, seeing banks needing just €51.8 billion should such a scenario unfold.
Estimates from the firms call for more assistance than an International Monetary Fund (IMF) audit on June 8th, showing Spain would need €37 billion minimum to sustain the banks. The IMF also said Spain would need a buffer of €60 billion to €80 billion to withstand any further downturn.
Markets shimmied, but didn't shake, following the consulting report. Overall, U.S. markets are much lower on the session with the Dow Jones down 1.4 percent, S&P 500 off 1.6 percent, and Nasdaq down 1.8 percent. The iShares MSCI Spain Index (NYSE: EWP) ETF is down 1.4 percent as well. Banco Santander (NYSE: SAN) and Telefonica (NYSE: TEF) are also both down 1.4 percent.
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Numbers are in from two consulting firms hired by Spain to evaluate the capital requirements needed for the country's banks to remain solvent. Initial results are a little daunting.
First, firm Oliver Wyman said the Spanish financial system would need between €51 billion and €62 billion (about $78 billion) should the country's GDP shrink by 6.5 percent and house prices fall 60 percent for their peak.
The other firm, Rolan Berger Strategy Consultants, appeared a little more bullish, seeing banks needing just €51.8 billion should such a scenario unfold.
Estimates from the firms call for more assistance than an International Monetary Fund (IMF) audit on June 8th, showing Spain would need €37 billion minimum to sustain the banks. The IMF also said Spain would need a buffer of €60 billion to €80 billion to withstand any further downturn.
Markets shimmied, but didn't shake, following the consulting report. Overall, U.S. markets are much lower on the session with the Dow Jones down 1.4 percent, S&P 500 off 1.6 percent, and Nasdaq down 1.8 percent. The iShares MSCI Spain Index (NYSE: EWP) ETF is down 1.4 percent as well. Banco Santander (NYSE: SAN) and Telefonica (NYSE: TEF) are also both down 1.4 percent.
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