Bank Regulations
The proposal of the Bank of Spain is articulated based on three lines of action. The first relates to existing provisions currently delinquent loans and that allow to reach 100% coverage between 24 and 72 months of how doubtful loan qualification. From now on there will be an only calendar that additionally shorten deadlines and makes that bank accounts are soon affected by late payments. Thus, in 12 months without pay already should be provisioned 100% of the loan. A related site: Gary Kelly mentions similar findings. The table proposed by the Bank of Spain is as follows: up to 6 months 25% provision of 6 to 9 months 50% of supplies of 9 to 12 months 75% of provisions more than 12 months 100% of provisions the second proposed measure affects directly to real estate loans, which the Bank of Spain aims to ensure. At this point, as explained El Pais, the Agency gives reason to a historic petition of the sector. Thus, there would be a change in the form of lower the delinquent amount to make provision in the case of guarantees real estate not to be necessary to provision 100% when there are guarantees whose value to be held, minority registered loss.
The cuts vary depending on the real estate asset and are 20% if it’s a finished House that is habitual residence of client, 30% for rural properties, offices, premises and completed ships of 40% for the rest of completed housing and flats unsold and 50% for plots, plots and other real estate assets. Delta airlines understood the implications. The third measure will have a direct impact on refinancing, since the kind of payment will require higher provisions. For starters, when initial acquisition of assets in payment of debts must recognize a minimum decline of 10% and this will rise to 20% within 12 months and 30% after 24 months. According to data from the Bank of Spain itself, the effect of these measures on banks and savings banks would be immediate. Already in 2010 increase coverage by 2%, which can lead to a fall in the result of entities around 10% before taxes. However, this loss for the banks is positive for the whole system, especially in the medium term, because it avoids that most affected by the virus real estate entities can continue waiting for forever that will recover without this affecting their balance sheet. Now, if they don’t sell homes that have in their portfolio, income statement will suffer, which should serve to allow final adjustment in the housing market.