Category Archives: Finance
Finance, News/Finance
Spanish Banks to Transfer Toxic Debts to New 'Bad Bank'
Mariano Rajoy´s government on Friday approved by decree a fundamental change to the banking sector with the creation of a ´bad bank´ to take ownership of toxic debts held by Spain´s mortgage banks, notably Bankia, Santander, BBVA, and the various cajas with high debt to assets ratios.
Responding to demands from the ECB and other Eurozone members to clean up Spain´s banking industry, the move is expected to satisfy Eurozone partners and start the process of Spain receiving upto 100 billion Euros of banking sector bailout funds to stabilise the economy.
Speaking after the announcement Soraya Saenz de Santamaria, the deputy Prime Minister, said that this additional decree and the creation of the ´bad bank´was needed to "get credit flowing in the economy" again.
Banks with distressed property assets that are transferred into the ´bad bank´ will walk away with a combination of cash, debt or shares to add to their balance sheets, with the requirement that all banks increase their core capital classed as rock solid to 9% of total assets, a shift from the current 8%.
As well, the government announced that remuneration for senior managers and directors of distressed banks would be capped at 500,000 Euros per year, in an effort to stem protests at former directors of failed banks taking home millions of Euros in compensation at the expense of bank shareholders and depositors.
Olli Rehn, Economics Affairs Commissioner for the EU praised Rajoy´s cabinet for approving the decree stating that the creation of a bad bank sends an important signal to the world financial markets that Spain is determined to clean up and strengthen its banking sector.
With unemployment over 25% across the board and important regions such as Catalonia and Valencia asking for central government bailouts, Rajoy´s cabinet needed to do something to stem the banking sector crisis before tackling local government debt.
The Bank of Spain warned at the same time that capital flight to foreign banks had reached 20% of GDP, with June alone seeing net capital outflow of 56 billion Euros, and an estimated total of 220 billion in the first half of the year. Both the Spanish government and Eurozone will be hoping the creation of the ´bad bank´ will be sufficient to restore some confidence and stem the flow of cash leaving the country´s banks.
In a concession to the Spanish public, the economy minister Luis de Guindos announced that the government´s banking agency (Frob) will be given new teeth to take control of failing banks, and replenish funds in the depositor guarantee scheme which have been completely used in previous bank rescues.
Spanish Government Restricts Cash Payments to Close Black Market
April 14, 2012 Ronda Today
On Friday last week the Spanish President Mariano Rajoy introduced a new financial reform bill into congress, which includes a 2500 Euro limit on cash payments where one party is a business person in an effort to reduce the size of the black market and eliminate false invoices.
Rajoy's government estimates this will bring an additional 8.1 billion Euros into government coffers and is just one of several measures being introduced to combat tax avoidance. Current estimates suggest as much as 30% of the Spanish economy is fueled by the black market, but as the financial crisis deepens this may increase.
Businesses and self-employed who continue to pay or accept payments greater than 2500 Euros in cash will now be subject to fines that could total as much as 25% of the total disbursement.
All businesses are affected, including hotels and guesthouses, and whilst the move may be difficult to police, Spain's taxation authorities may adopt more stringent assessment criteria in the event significant cash transactions are suspected.
Private individuals receiving an invoice greater than 2500 Euros, for example building repairs or installations, buying furniture or other high value goods, or paying for holidays etc will now be required to pay using their bank issued card (cc or debit) or send an electronic payment.
Spain is Still the #1 Destination for British Property Buyers
January 24, 2012 Ronda Today
A British magazine survey has once again confirmed Spain as the number one property destinations, despite nearly half a million brits leaving the country in 2011 due to the economic crisis in Europe. Official statistics place 391,000 British in Spain, a figure that is usually considered much lower than in actuality due to the number of expats who don't register for NIE or empadronamiento.
Helping insulate the property market from further losses were 24,815 British new arrivals in 2011 a significant percentage of are presumed to have bought property whilst prices remain depressed.
The value of property in Spain has fallen by around 30% in major cities Madrid or Barcelona, and as much as 50% or 60% in some places where availability is higher than demand. Coastal areas popular with British expats like the Costa del Sol, Costa Calida, and Costa Blanca were particularly hard hit.
The annual 'Ten Best Places to Buy Abroad' conducted by A Place in the Sun is widely considered a barometer of British perceptions about the overall safety and desirability of foreign property destinations, and Spain placing first will no doubt be a huge relief to real estate agents who specialise in expat property sales.
Destinations appearing in the top ten list in order of popularity were Spain, France, Portugal, Italy, USA, Turkey, Greece, Cyprus, Caribbean, and Malta. Seven of the ten destinations are Eurozone countries including the top four.
The USA has risen in the list, notably due to the availability of foreclosed homes in sunny states such as Florida, and the Caribbean is a new entry, suggesting that cashed up buyers are willing to relocate considerable distances.
Reasons for continuing to buy in Europe haven't changed, with Liz Rowlinson, editor of the magizine saying "What's really interesting about our annual 'Ten Best Places to Buy Abroad' survey is that it shows UK buyers as sticking to tried and tested European countries – yet also willing to travel further to destinations such as Florida and the Caribbean to find their perfect holiday home location."
Spain to Reintroduce Wealth Tax
September 16, 2011 Ronda Today
With growing concern at the state of the Spanish economy and ongoing efforts to reduce the budget deficit failing, the Spanish government will today reintroduce a wealth tax (patrimonio), which it abolished just 3 years ago. Spain's deficit reduction is part of a stability agreement with the European Union in response to the current financial crisis affecting the Eurozone.
The new tax is expected to assess wealth in the 2011-2012 years, with income to the government coming into treasury in 2012-2013. Hoping to raise an additional 1 billion euros, Elena Salgado, finance minister in the PSOE led government stated that the tax will likely affect 160,000 of Spain's wealthiest people, who will face tax bills of upto 2.5% of their declared assets.
Citing concerns within PSOE that Spain's former wealth tax unfairly targeted middle class savers, Salgado confirmed the new wealth tax threshold has been raised from 120,000 euros to 700,000 euros, but refused to speculate on post-election threshold. In addition, exemptions for people's homes will be set at 300,000 euros.
The introduction doesn't require parliamentary approval, a full sitting of cabinet being sufficient, and it is understood the opposition PP who have previously rejected a reintroduction of the wealth tax will accept the measures, and may choose to retain the tax after the election if successful in forming a government.
The move is expected to be popular with left wing voters, and could reduce the 15 point difference in opinion polls between PSOE and PP, though with decisions by PP recently to back the government on stimulus measures, including the constitutional change to ensuring Spain's central and community governments balance their books, polls may not be as affected prior to the Nov 20 general election as is hoped by PSOE leaders.
Spain Tax
Currencies Direct Announce Partnership with La Caixa for Zero Commission Transfers
Currencies Direct Ltd and Spain's La Caixa, one of Europe's leading savings banks, have announced a partnership offering zero commission transfers between customer accounts and Currencies Direct, specifically for people needing to transfer funds between the UK and Spain whether to buy or sell property, or to cover monthly expenses.
The agreement has been hammered out to provide relief from fees for bank drafts in Spain, which are often charged at 0.6% and have been known to be 1.25%, still cheaper than using the bank for end to end transfer, but an expensive and unnecessary fee nevertheless. As well, other commissions charged by La Caixa will be waived if the account is a Currencies Direct 'la caixa' account.
Jose Ivars-Lopez, head of marketing at Currencies Direct in London explained "We also offer some great benefits on banking through our partnership with la Caixa bank. If any of our customers open a Currencies Direct la Caixa account in Spain they can make immediate transfers to that account from the UK via Currencies Direct. No more clock watching, or cut off times".
Under the agreement, all funds transferred via a Currencies Direct 'la caixa' account will be available in the client's Spain account as soon as the funds hit CUrrencies Direct, a significant improvement on past transfers that could only be completed by a certain time of the day. The service is of particular use to property buyers who need to have funds cleared in Spain prior to signing property transfers.
British expats living in Spain and making regular monthly transfers to cover living expenses and who open a La Caixa account with Currencies Direct will also now have funds available for direct bank payments to utilities on the day the funds arrive in Spain, and not have to wait until the next business day.
The number of expats resident in Spain is still a significant number, with the British consul in Malaga estimating that over 400,000 British stay full time or part of the year in the Costa del Sol, and with rising numbers of Spaniards working in the UK and repatriating funds to support mortgages and other expenses, the market for pound/euro transactions is significant.
Customers of Currencies Direct have been mailed a letter with the following benefits to opening an account through La Caixa;
0% commission charged when you deposit a bankers' draft
Immediate transfers from UK to Spain – no cut-off time
No fees to make transfers from Spain to UK or reverse if you use your "la Caixa"
Online banking in English
Exclusive Visa Debit Card
La Caixa currently have 5,500 branches throughout Spain, and over 8,100 ATMs, servicing 10.7m customers. Read more about Currencies Direct.