Members of the Florida International Bankers Association head to Spain this month to meet with their European and Latin America banking counterparts as well as regulators from both Spain and the United States.
The Spain-U.S. Forum on International Banking, which is being organized by FIBA, will be held in Madrid on May 23. Participants will look at challenges bankers face in an environment shaped by toxic assets, the sovereign debt crisis, and sluggish economic growth as well as discuss opportunities going forward.
Like U.S. banks, many Spanish financial institutions were hit hard when the housing bubble burst and left troubled real estate loans on their books. In Spain, however, the problem wasn’t subprime mortgages or investment in toxic securities, but rather too many real estate loans that soured as the Spanish economy spiraled downward.
South Florida bankers, lawyers and consultants making the trip will take part in what FIBA President Darío Fuentes calls a “public-private dialogue’’ involving regulators from the Federal Reserve and Banco de España, the Spanish Banking Association, and the Latin American Federation of Banks. The Spanish Confederation of Savings Banks also has been invited.
FIBA wants to serve as a bridge connecting European, Latin American and local banking interests, said Fuentes, who is general manager of Caja Mediterráneo’s agency office in Miami.
At least 10 Spanish banks have set up agencies, branches or representative offices in South Florida over the past decade, and some 300 of the 500 major Spanish companies operating in the United States are in Florida. Spanish banks are particularly interested in this region because from a South Florida perch they can keep track of business in the United States as well as in Latin America.
The Florida and Latin American bankers will be getting an update on recent steps Spain has taken to shore up its troubled banking sector, especially its cajas de ahorro, or mutual savings banks, which had been heavily involved in lending to developers.
The government seized two small, insolvent cajas and encouraged others to merge to increase their viability. These mergers have resulted in 45 cajas being whittled down to 17. These merged cajas have formed new banks in which they are shareholders.
Earlier this year, the government issued a decree law that tightened capital requirements for all Spanish financial institutions in a bid to strengthen the financial system and persuade investors that it won’t follow the European bailout route of Ireland.
Under the decree law, Spanish financial institutions will be required to maintain a core capital ratio — a measure of financial strength and a buffer against potential losses — of at least 8 percent, or at least 10 percent if they are more dependent on wholesale markets or haven’t shown the ability to tap capital markets.
Many of the cajas fall into the latter category and the new capital requirements put pressure on them to convert to publicly held companies or seek mergers or new investors.
Financial institutions had to submit their plans for reaching the new core capital requirements to the Banco de España in April. Those that can’t meet the requirements by the end of September will be able to tap into Spain’s bank rescue fund, the FROB — but, in exchange, the government will take a stake in them.
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