General Information & Client Service
  • Americas: +1.212.553.1653
  • Asia: +852.3551.3077
  • China: +86.10.6319.6580
  • EMEA: +44.20.7772.5454
  • Japan: +81.3.5408.4100
Media Relations
  • New York: +1.212.553.0376
  • London: +44.20.7772.5456
  • Hong Kong: +852.3758.1350
  • Tokyo: +813.5408.4110
  • Sydney: +61.2.9270.8141
  • Mexico City: +001.888.779.5833
  • Buenos Aires: +0800.666.3506
  • São Paulo: +0800.891.2518
October 06, 2017

IMF published its staff report, selected issues report, and the financial system stability assessment (FSSA) report on Spain. These reports are a part of the IMF's financial surveillance of Spain. The FSSA report on Spain is based on the work of the Financial Sector Assessment Program (FSAP) missions.

The staff report noted that the banking system has become more resilient since the last FSAP. It has strengthened its solvency and continued to reduce nonperforming loans for businesses in Spain. Capitalization has remained broadly stable, as banks used retained earnings to maintain capital buffers during the transitional arrangement of Basel III implementation. Though generally less leveraged, Spanish banks have lower fully loaded common equity tier 1 capital ratios than European peers. With ECB’s extraordinary support, banks tend to have ample liquidity. Funding challenges are set to rise over the medium term as the ECB’s policy unwinding proceeds, potentially affecting both liquidity and profitability of banks. Additionally, banks may need to adjust their liability structures to fulfill new regulatory requirements such as Minimum Requirements for Own Funds and Eligible Liabilities or MREL. The report discussed the resolution of Banco Popular and highlighted that banks need to continue improving profitability, building capital buffers, and adjusting funding positions. Moreover, establishing an interagency Systemic Risk Council (SRC) could enhance systemic risk surveillance and macro-prudential decision making. The selected issues report examines the challenges facing the Spanish pension system and the impact of deleveraging on the banking system, also highlighting that corporates have started to rely less on financing from the banking system.

The FSSA report highlights that Spanish banks will benefit from raising more high-quality capital and further compressing operating costs; this will help compensate for the phase-in of deductions under the Capital Requirements Regulation (CRR). Though not yet a strong source of systemic risk, focus on insurance, capital markets, and the credit cooperative sectors must intensify. Furthermore, the Spanish financial system is getting more exposed to contagion risks that need enhanced oversight and analysis, including improvements in data collection.To effectively manage the macro-financial and structural challenges, stronger institutional foundations for financial oversight are a must. The FSAP’s proposed establishment of an SRC would considerably enhance the country's capacity for systemic risk oversight and policy coordination. Spain completed a timely transposition of certain EU Directives, such as Capital Requirements Directive (CRD) IV and the Banking Recovery and Resolution Directive (BRRD), and has publicly committed not to use public funds for bank bailouts. Future action should be on developing a resolution strategy for less significant institutions with a low level of loss-absorbing liabilities. While the banking resolution regime has been strengthened, the broader crisis management framework could be further enhanced. A tough stance on the implementation of the ECB guidance on NPLs is also desirable.

The FSSA report reveals that all banks had liquidity coverage ratios above 100%, at the end of 2016, while the net stable funding ratio did not reveal any excessive maturity transformation, with a comfortable aggregate ratio of 111%. The FSAP stress tests showed that a few significant institutions would struggle to remain resilient under the severely adverse scenario. The EIOPA stress test results revealed the need for better matching of assets and liabilities by insurers in Spain (and across the EU), even among those applying for the Matching Adjustment under Solvency II. The report highlights that domestic financial markets and nonbank financial institutions are less developed than banks and other European markets, depriving market participants from alternative mechanisms for risk-sharing and savings allocation that could provide buffers in times of a liquidity or a systemic stress. The implementation of the Solvency II regime requires changes in the current compliance-based supervisory culture. Furthermore, DGSFP, the insurance supervisor, should further develop its skills and proficiency in assessing the quality of insurer governance and risk management.

 

Related Links

Keywords: Europe, Spain, Banking, Insurance, FSAP, Article IV, FSSA, CRR, Solvency II, BRRD, IMF

Related Insights
News

FSB Report Examines Financial Stability Implications of Fintech

FSB published a report that assesses fintech-related market developments and their potential implications for financial stability.

February 14, 2019 WebPage Regulatory News
News

US Agencies Amend Regulatory Capital Rule to Allow Phase-In for CECL

US Agencies (FDIC, FED, and OCC) adopted the final rule to address changes to credit loss accounting under the U.S. generally accepted accounting principles; this includes banking organizations’ implementation of the current expected credit losses (CECL) methodology.

February 14, 2019 WebPage Regulatory News
News

OCC Consults on Company-Run Stress Test Requirements for Banks

OCC proposed amendments to its company-run stress testing requirements for national banks and Federal savings associations, consistent with section 401 of the Economic Growth, Regulatory Relief, and Consumer Protection (EGRRCP) Act.

February 12, 2019 WebPage Regulatory News
News

CFTC Extends Comment Periods for Trade Execution Requirement Proposals

CFTC announced that it is extending comment period for the proposed amendments related to the regulations on swap execution facilities (SEF) and trade execution requirement.

February 12, 2019 WebPage Regulatory News
News

OCC Proposes to Renew Information Collection Under Stress Test Rule

OCC is proposing to renew its information collection titled “Annual Stress Test Rule” (OMB Control No: 1557-0311). Comments must be received on or before March 13, 2019.

February 11, 2019 WebPage Regulatory News
News

OSFI Consults on NSFR Disclosure Requirements for D-SIBs

OSFI proposed the draft guideline on the net stable funding ratio (NSFR) disclosure requirements for domestic systemically important banks (D-SIBs).

February 11, 2019 WebPage Regulatory News
News

EC Amends Its Regulation to Clarify Impairment Requirements for IFRS 9

EC published the EU Regulation 2019/237 that amends Regulation (EC) No 1126/2008 adopting certain international accounting standards, in accordance with Regulation (EC) No 1606/2002 regarding International Accounting Standard (IAS) 28 on Investments in Associates and Joint Ventures.

February 11, 2019 WebPage Regulatory News
News

FSB Chair Randal Quarles Speaks About the Upcoming Work of FSB

While speaking at the BIS Special Governors Meeting in Hong Kong, Randal K. Quarles, the Chair of FSB and Vice Chair of FED, discussed his views on how the work of FSB must evolve and the key principles that, he believes, should inform that work.

February 10, 2019 WebPage Regulatory News
News

OSFI Proposes to Amend the Liquidity Adequacy Requirements for Banks

OSFI proposed revisions to the Liquidity Adequacy Requirements (LAR) Guideline for banks. OSFI published the proposed drafts (with proposed changes highlighted in yellow) of Chapters 1,2, 4, and 5 of the LAR guideline.

February 08, 2019 WebPage Regulatory News
News

HKMA Publishes FAQs on Local Implementation of IRRBB Framework

HKMA published the frequently asked questions (FAQs) related to the local implementation of the interest rate risk in the banking book (IRRBB).

February 08, 2019 WebPage Regulatory News
RESULTS 1 - 10 OF 2593