Spanish banks’ reliance on ECB surges

The European Central Bank has effectively funded new lending in Spain in recent months, replacing banks’ use of wholesale capital markets, which have been strangled by the global credit crunch.

Spanish banks doubled their share of the ECB’s weekly funding auctions in the final quarter of last year, taking their borrowing up to €44bn in December from a running average of about €20bn over the previous 15 months, according to the most recent data from the Bank of Spain.

This extra lending from the ECB of almost €24bn outstrips the quarterly amounts raised previously by Spanish banks from securitisation markets, which is an important comparison because the banks have increasingly used mainly mortgage-backed securities as collateral with the ECB.

The market for securitised debt and for mortgage-backed bonds in particular has been almost entirely shut since the credit crunch hit last summer and investors began shunning complex, structured debt.

The Spanish banking system is second only to the UK in Europe in its use of mortgage-backed bond markets and other securitisations to fund lending.

However, the Bank of England did not accept mortgage-backed debt as collateral in similar lending operations until after the run on Northern Rock.

Jean-Claude Trichet, president of the ECB, last week insisted the central bank had not been bailing out banks in Spain, but said there had been a marked increase in use of securitised bonds as collateral by Spanish banks and others.

The big difference is that European banks must re-raise this funding every week and the mortgage-backed bonds pledged at the ECB will have to find their way to the capital markets eventually, which many analysts say could mean markets such as Spain are potentially storing up problems for the future.

While markets for securitised debt remain closed, it is difficult to put a price on european mortgage-backed securities, and banks in the region can be much slower to mark down the value of holdings of such bonds.

By accepting them in exchange for cash, the ECB may be delaying the repricing of risk that analysts believe is necessary for the orderly resumption of markets in such debt.

The Spanish Socialist government, along their always-happy-with-politicians-that-hate-freedom oligarchs are trying to avoid the collapse of the Spanish economy before next March 9th National Elections.

The main private Spanish banks -Santander, BBVA, Popular...- that had widened their business internationally are not a concern, however, in Socialist countries like Spain there is always a “state-owned banking system” - the regional “Cajas”, the ICO- which it seems have a big exposure to mortages and lending to the oligarchs following orders of the politicos.

It is said that up to five regional “Cajas” will go bankrupt after March 9th, along with two big companies.

Meanwhile, the Socialists are holding the situation with soft credits from ICO -Official Credit Institute-, a State owned national bank, and have ordered to avoid any bankrupcy before March 9th.

They hope to contain the situation with the help of the big mass media corporations owned by the same oligarchs, as they did in 3/11.

It is true that the main Spanish private bankers have a good part of blaming in what happens in Spain since 1973: they have never been interesed in industrial banking -such as the Deutsche Bank in Germany, the owner of Mercedes and MBB defence company-, but in doing big financial deals regardless the impact on the country.

However, it is also true that they have built very strong and profitable entities, now with worldwide interests.

Nevertheless, there is a state-owned banking system -the regional government owned "Cajas"- that simply follow the politicians orders when lending money.

The "Cajas" are the way, very used in Europe -in Italy was Mediobanca for many years- of pumping money from the wallets of the taxpayers to the pocket of the always-friend-of-politicians oligarchs. Oligarchs that, of course, hate freedom and any attempt of controlling such financing methods, and will use against them all the power of the mass media they own.

Believe me or not, the control of Spanish energy market by the Catalonian oligarchy, through their regional "Cajas"- seems to be the motive behind the 3/11 massacre.

Narciso Serra, former defence minister during nine years under Socialist government, is now the president of Caixa Catalunya -a "caja"-.

Jorge Dezcallar, the chief of the secret service during 3/11, is now working in REPSOL the Spanish oil company, as secretary general of the International Advisory Board, after being taking over by La Caixa -another Catalonian caja.

It has always been Socialism.

The macroeconomic system under Franco's regime was Socialist in the sense that the State ruled the economy through state-owned companies, such as CAMPSA, whose "M" means monopoly and "P", petrol; ENDESA in electricity; Argentaria in banking, etc. Moreover, Franco exerted a tutelage over private banks, never letting them having too many profits if they went against the interests of all.

The Socialists government after Franco's death only changed that the tutelage over private bankers was lifted and some state-owned companies began to be administer as private ones, as the European Union recommended, in order to achieve a better performance of the whole economy.

The right wing Aznar government, on the contrary, sold them, reducing the State-owned sector to a very few smaller companies, furthermore, he introduced Spain in the Euro zone, which meant that no devaluations can be carried out in order to obtain some competitiveness in the economy, as the Socialists did up to five times in the 1991-93 crises. Of course, he also blocked any attempt by the Catalonian and Basque oligarchs of controlling the newly public companies, heirs of the old monopolies.

Such policy of freedom, of withdrawing of the State from the economy, that brought a sharp economic growth, was not shared by the bankers and oligarchs. The old national monopolies, now public companies, were a too sweet candy for them and for their foreign allies. Aznar paid opposing their interests -internal and foreign- with a worldwide public mocking.

The Spanish economy has always been Socialist. Spanish big businessmen -oligarchs- invest their money only in State regulated business, such as energy, toll roads and real estate -which sharply worsened the bubble-. Big bankers earn money whatever the situation is without bothering about the country, and all control the mass media. It is striking to wacth through Satellite TV that Latin American channels are more critic against their governments than Spanish against ours.

Of course, there are also truly businessmen, -anglosaxon style- competitive, sucessful and honest; but they don't dare to oppose to the interests of the politicans-oligarchs-bankers. As they say: I don't step into politics.

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