The
government’s latest move to help out the banking sector has ballooned beyond
all expectations. A November decree that transformed some of the banks’
deferred tax assets (DTAs) into state-guaranteed tax credits means that the
sector may save as much as €40 billion. This is €10 billion more than the
original government estimate, according to figures collated by EL PAÍS from
Spain’s major lenders.
DTAs are used to reduce future income tax expenses, often in connection with bank losses or provisions. Generic provisions reduce a lender’s profits, but they are not tax deductible until the losses materialize. If the profit was not large enough for the bank to save itself that tax, then the DTAs were lost. But under the new rules, the state backs them with public debt.
DTAs are used to reduce future income tax expenses, often in connection with bank losses or provisions. Generic provisions reduce a lender’s profits, but they are not tax deductible until the losses materialize. If the profit was not large enough for the bank to save itself that tax, then the DTAs were lost. But under the new rules, the state backs them with public debt.
The
€40.5 billion in state-backed tax credits held by Spain’s 15 main lenders is 35
percent higher than the original estimate of €30 billion offered by Economy
Minister Luis de Guindos when he presented the decree.
The
banking group that benefits the most is BFA, with nearly €7 billion in
state-backed tax credits, followed by La Caixa (the total figure is not known,
but CaixaBank alone holds nearly €5 billion), Santander (around €5.4 billion in
Spain), Sabadell (€4.8 billion) and BBVA (€4.4 billion). The banks under the
control of the Orderly Bank Restructuring Fund (FROB) add around €14.8 billion
of these assets.
These
figures are mostly taken from the lenders’ annual reports; in some cases the
banks provided the information. Several of them warned that these are still
estimates that could change.
But
the total amount – including other lenders besides the top 15 – will certainly
be in excess of the €41.3 billion that was funneled into the sector as part of
the banking bailout of 2012.
The
International Monetary Fund recommended that this new measure come with
conditions forcing banks to increase their capital ratios through other means,
but the Spanish government ignored that suggestion and has offered the state
guarantee with no strings attached.
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