Summary Latinoamericano / Pedro Montes, an economist, Socialism 21/14 June 2017
Obscurantism that dominates the financial world, particularly in the banking system for the simple reason that if the panic on an institution unleashes its collapse can be almost inmediator with massive withdrawal of deposits, prevents unraveling in depth what happened the Banco Popular and the way the Spanish (the only Adjudication Board of the ECB, another surrender of sovereignty) and European monetary authorities have resolved this new serious incident.
Everything indicates that the Popular Bank was bankrupt, that is, the value of its assets, about 150,000 million euros, was insufficient to cope with the volume of its liabilities, consisting mainly of deposits, 115,000 million euros, debts other credit institutions, some 15,000 million , and shareholders ' equity, about 10,000 million. Overly involved in real estate, mortgage NPLs, the above "brick" , and exaggerated investments on the ground, they had degraded their balance continuously.
Nothing new in what has been the financial crisis since the outbreak of the mortgage crisis "subprime" in North America, who dragged the entire international financial system and by extension the Spanish financial system to a period of enormous convulsions, whose improvement is far from be resolved.
Banco Popular was mortally wounded, his creditworthiness into question, and then to trigger a situation of illiquidity was a step as mistrust of customers in the recovery of deposits true.
A traumatic but nothing new outcome in representing the timing of the events of bankruptcy of a bank, in this relatively important in our country's case, as it was the fifth bank for its balance.
The so-called "hole" is very difficult to accurately and fits be estimated at about 17,000 million euros if the given solution eliminating at a stroke the entire equity of the entity, which could be about 10,000 million on June 6 is accepted, and require the bank Santander a share issue by some 7,000 million euros to deal with the acquisition has taken place.
not inconsiderable and relevant data, but certainly nothing comparable to what have been other serious crises of other banks since 2008, when the bankruptcy of investment bank Lehman Brothers marked 700.000 million.
For the amounts involved, everything suggests that other possible solutions fit, as had been injecting liquidity into the bank -recuérdense which cost 25,000 million Bankia or treatment that seeks to other troubled banks in Italy, or distribute costs bankruptcy differently, as might have been valuing Banco Popular shares for a price other than zero and qualify it by sections property.
Fit all the speculation about what was intended to do with Banco Popular and interests have come into play when liquidating, which must have been a lot of juicy predation.
In any case, moreover, always it left open the opportunity for the State itself with decisive action had been taken over, at minimal cost, a significant part of the credit system, realizing what many political programs announced to rebuild a public bank. Such is the ideological decline of society and left with the current capitalism that even when such shocks occur remembered that historically the answer of a powerful public banking has been a claim, even a practice, common in the past.
Of course, the issue of Popular is not closed, but it is intended by the government to give shelve formally, for damages caused some 300,000 shareholders and irregularities which again have been committed, allowing or providing capital increases false information on the real financial situation of the bank, including the famous analysis of European stress.
Regulatory and control institutions is not only looking the other way ignoring their responsibilities, but feed financial scams that are forged under ignorance and opacity covering the financial world.
past or future crises
From the general political standpoint, the key question posed by the singular case of Banco Popular is whether to enroll in the wake of the great suffered financial crisis since 2008 or, on the contrary, is an annunciator flash of other dangerous storms to come. My opinion is that pending huge seizures and episodes of emergency, after taking into account the situation of our country as the most general of the global financial situation.
All propagandist security issued by the government on the safety and soundness of the financial system is compromised by what has happened to the Popular, which already extends to other entities, as is the case with Liberbank.
The data are imprecise, but still recognizes that banks are hiding in their balance sheets tens of millions of real estate, perhaps some hundreds of thousands toxic assets, which have not yet digested despite the institutional framework that has been created to relieve them of the destructive burden.
Moreover, the entire banking system has enjoyed in recent years of a certain exceptional evolution as the major channel through which the State has been financed by issuing hundreds of thousands of millions of euros to reach the public debt 100% of GDP and by the ECB he injected liquidity into the economy to support that debt.
A strange, beneficial circuit for banking, generated in a context of minimum interest rates ECB, or no, that sooner or later will have to end.
If the banking crisis has jeopardized the state so far, it will be the debt that has already reached the state that put in check the balance of the banks now.
Bragging taxpayers are discharged from the costs of intervention in the case of the People is not consistent with the fact that the state has spent on maintaining tens of millions of euros financial system and a boldness that has not yet He knows how it will end this story.
Not refer to the general indebtedness suffering entire Spanish economy, including external liabilities, for which it becomes one of the most vulnerable countries.
Should not forget that at the end of 2016, after 8 years of crisis, bankruptcies and financial adjustments, liabilities among companies, financial institutions, governments and households amounted to 7.8 trillion euros, which add another 2.6 trillion foreign liabilities of these agents.
In 2009, these figures were respectively 7.7 trillion and 2.3 trillion, leaving clear that the explosive charge debt remains intact, and even more dangerous by the increase in foreign liabilities.
But more importantly. Highlights and solvents analysts are announcing the proximity of another global financial crisis whose intensity, they argue, will surpass that we have seen recently.
The international financial institutions themselves subtly slide concern about the situation. As is known, the practice of injecting liquidity into exorbitant amounts by the Fed and the ECB has been the means to stop the uncontrolled consequence of the crisis.
The cash generated has stopped its spread but also has increased the risks that come upon more severe seizures.
If this occurs, by multiple factors existing instability, including politicians, it is conceivable that the Spanish financial system remain intact, since, as has been highlighted, the Spanish economy in terms of their overall debt has not been corrected, keeping whole system very high vulnerabilities.
After all, it is recognized that evolution between financial flows of the global economy and real flows of goods and services hasn charged an absurd and untenable imbalance, whatever comparisons. As the evolution of the volume of global financial assets and liabilities is unrelated to real GDP growth in the world.
The productive economy operates within a financial bubble that will have to disappear before capitalism can be standardized and begin another phase. It has to destroy much fictitious and speculative economies to clean up the capital, but that does not come to pass without major traumas, tensions and conflicts.
The case of Banco Popular gives us a perfect example of what will have to happen eg the overnight all holders of shares and bonds convertible bank have lost all their capital.Generalising the problems and anguish suffered by affected by the crisis People can serve as an image of what is about tohappen to another level.
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