Spanish aid to SMEs will not have mandatory haircuts after banks fight
MADRID, March 5 (Reuters) – Any restructuring of the state-guaranteed debt accumulated by Spain’s small and medium-sized businesses during the COVID-19 crisis will not be mandatory for banks, according to government and financial sources, an easing initial help proposal.
On February 24, Socialist Prime Minister Pedro Sanchez announced 11 billion euros ($ 13.1 billion) in aid to SMEs, without providing further details. A government source told Reuters the bailout would include debt cancellations for viable businesses, with banks taking part of the losses.
But after two weeks of complex negotiations between the government, the central bank and financial institutions, it was decided that such loss sharing would only be voluntary for banks, implemented through a “code of practice”. good practice “that all banks would sign, according to a government source.
The initial proposal had created uncertainty for banks, who warned of a potential reclassification of a much larger share of their loan portfolios as bad debt than a portion of the state-guaranteed loans to be written off.
Economy Minister Nadia Calvino has also been reluctant to impose cancellations – anathema to Spain after the 2010 debt crisis – various government sources told Reuters.
“Banks are the ones who can discern which (businesses) are viable and which are not and which instruments should be used,” Calvino said in a recent radio interview.
The measure could be approved on March 9, according to another government source, and will be accompanied by other lines of support for SMEs such as direct aids, capital injections and a line to help companies cover their fixed costs, such as rent or utility bills. .
The government declined to comment until the official announcement.
This aid will be particularly oriented towards the hard hit hotel sector. It will also help micro-enterprises that had not even applied for government guaranteed credit.
Injecting capital into mid-sized companies can be done through a tool called crowdfunding that Spain is already using to help large companies, like Air Europa.
A financial industry source familiar with the matter said automatic haircuts were “out of the equation,” but banks agreed they could renegotiate with companies on a voluntary basis.
“Everyone agrees that there is a debt problem, everyone will have to bear part of the cost of this (…) how to implement the code of good practice.
Codes of good practice have had mixed success in the past, as in the case of mortgage contracts, where lenders have always had some leeway to renegotiate terms directly with clients. Mortgage complaints from clients still represent the lion’s share of complaints filed with the Bank of Spain.
Spanish companies have been among the most active in Europe in the demand for government-guaranteed lines of credit and liquidity, but as in other European countries, attention has shifted to issues of solvency.
The public credit agency ICO, which bears up to 80% of potential losses on loans to SMEs, has granted 91.5 billion euros in financing lines, mobilizing a total of 120.4 billion euros in financing . ($ 1 = 0.8380 euros) (Reporting by Jesús Aguado and Belén Carreño; edited by Andrei Khalip, Larry King)