Spain to calculate property exposure as auction looms
THE Spanish government is today expected to appoint independent firms to assess the true valuation of its real-estate exposure in a last-ditch bid to address concerns over the health of its banking sector.
Oliver Wyman and BlackRock will compare the book value of loans to their market value as well as their potential value if the real estate market falls further, according to the FT.
The appointments come ahead of fears over the success of today’s auction, where the Spanish Treasury aims to sell between €1.5bn and €2.5bn of sovereign bonds expiring in 2015 and 2016.
The risk premium investors demand to hold Spanish over German debt rose over 500 basis points yesterday. And Prime Minister Mariano Rajoy warned that the Treasury faced trouble financing itself at a reasonable rate following the recent spike in yields.
World Bank president Robert Zoellick said yesterday a decision by Greece to leave Europe’s common currency zone could have a similar impact to Lehman Brothers’ 2008 collapse. “The core question will be not Greece, but Spain and Italy,” he said. “Where the danger comes in is when events come and they start to affect confidence and you get illiquidity moments, and illiquidity moments start to mean something begins to tumble, whether it’s companies or banks,” he said.