European Central Bank Executive Board member Joerg Asmussen said it’s too early to say whether some Spanish banks need to be wound down.
“We are at the beginning of the process to implement the banking sector reform program,” Asmussen said at an event in Brussels today. “It’s clearly too early to say what will happen to individual banks.”
Spain is negotiating the terms of a 100 billion-euro ($123 billion) European bailout for its banks, which are still reeling from the collapse of the debt-fueled real-estate boom in 2008. The government hasn’t liquidated any lenders, instead restructuring and selling on the banks it has seized since 2009. Deputy Economy Minister Fernando Jimenez Latorre said on June 13 that closing down banks wouldn’t be the most efficient solution.
The group of euro-area finance ministers “has the intention to vote formally” on July 20 on the memorandum of understanding, the agreement on the bailout that Spain is due to sign with other euro nations, Asmussen said.
“Then we will have to see if all banks are viable,” he said. “This is just the starting point of the exercise to really make sure where we stand, what are the recapitalization needs, maybe some institutions need to be resolved.”
Spain won an extra year last week to bring its deficit within the European Union’s 3 percent limit as finance ministers agreed to loosen the 2012 deficit goal to 6.3 percent of gross domestic product from 5.3 percent.
“This is now a realistic goal that must be achieved,” Asmussen said. “The package that was put on the table by the Spanish government last week was certainly an important step.”