maandag 5 juni 2017

Spanish Banking Crisis Spreads As Banco Popular Credit Curve Inverts

Having told its employees "don't panic" over the weekend (at the crashing stock and bond prices of Spain's 6th largest bank), it appears investors are ignoring that message as Banco Popular's credit curve has inverted for the first time since 2012 in the biggest red flag yet that Spain's banking crisis is systemic and about to test the EU's bail-in laws. Banco Popular Chairman Emilio Saracho sent a letter to staff assuring them the bank remains solvent after Friday's stock crash, courtesy of Expansion: From the management we are aware that the information that is being published affects the work and the spirit of each one of you, but our obligation as professionals is to focus on the day to day and on the clients, since the activity of the bank must continue as it has so far" begins the statement, whose target is the Professional Association of Directors Banco Popular.
The central message of this letter sent yesterday is the following: "Banco Popular remains solvent and has positive net worth. Our bank is in a difficult situation," says Saracho. For this reason and in order to meet the regulatory requirements that the European Central Bank demands for next year and guarantee our strength and future, we are working on different alternatives. Our customers and our shareholders are the most important thing for us, and for this reason we must send them a message of confidence and confidence that we are making every effort to overcome this situation," the letter concludes...


# In short, Saracho urged the bank's group of 1,800 managers to continue working hard; saying business activity should go on as normal, and that it was important to instill confidence in clients and shareholders. Unfortunately, one look at the bank's recent surge in default risk as seen in its senior bond CDS, suggests that "those who panic first", may be doing the smart thing.. and now the curve has inverted (lower pane) for the first time since 2012's crisis peak...