Though Spain has not yet formally requested their €100 billion bailout ($125 billion), that formality appears to be set for next week. The initial review, based on six month old data, suggested the banks had plenty of room under the bailout amount. A new review suggests that they still have room, though new questions are being asked about the calculations of potential defaults.
The Big 4 accounting firms will also be doing their own review, but let's remember that the Big 4 has been at the heart of so many scandals (or shall we say, fraud) including Enron and Parmalat to name a few. Asking the accounting industry to confirm numbers is generally a useless exercise due to their special ability to combine corruption with incompetence.
Also under discussion is whether or not the top three Spanish banks are in the clear or not. The latest report suggests they're all doing well despite their recent downgrades as well as the reality that everyone around them is falling apart. How believable does that sound to anyone else? It's like JPMorgan insisting that they didn't need the 2008 bailout when in fact they really did. When your entire industry is collapsing, everyone goes down whether you like it or not.
Drip, drip, drip...
Publication of these broad assessments has cleared the way for Luis de Guindos, economy minister, to make a formal request on Monday to his euro zone partners for a credit line of as much as 100 billion euros.
This money—a partial bailout for the crisis-stricken Spanish state—will be used to recapitalize needy banks, including Bankia, the merged group of seven savings banks that has called for 19 billion euros of emergency capital support and is being nationalized.
From Madrid to London, however, skeptical analysts say much more needs to be done, and done more quickly, to restore confidence in Spanish banks so they can revive lending to businesses and help to end a crippling economic recession.