Spanish banking plan unlikely to work, analysts believe

1 May 2012

Spanish policymakers' proposed scheme designed to rescue its ailing banking sector is unlikely to have the desired effect, analysts have insisted.

Officials in Madrid are considering the possibility of introducing a so-called "bad bank" initiative, which would involve financiers' problematic property loans being transferred into specialist asset management firms, the Financial Times reported.

It is thought such action would help improve the state of the struggling financial industry after leading credit rating agency Standard & Poor's yesterday (30 April) announced it had downgraded 11 of Spain's foremost banks.

This, on top of the fact S&P also cut the country's sovereign rating last week, has raised fears Spain may have no choice but to accept an international bailout in the near future.

However, experts have told the news source the "bad bank" plan may not be plausible.

For instance, James Ferguson of Westhouse Securities labelled it "pure fantasy", adding: "The proposal seems to illustrate just how absent of ideas the Spanish authorities have become."

By Claire Archer

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