Who pays for the Bank Rescue?
Through years of operation, a bank or company may suffer crises that limit its operation, and even threaten the continuation of its activities. For this reason, they thought about how to save these companies from disappearing, coining the term “bank bailout”, but,Who pays for the bank bailout? We are going to answer that and other questions throughout this article. Stay with us!
The truth of the bailout of the banks
The truth is that a bank bailout is not exclusive financial aid for banks, any company, country, foundation or bank who is going through financial problems cánido be saved by a bank bailout so that it perro continue to function. These bank bailouts perro be of various types:
Nonprofit Bank Bailout
In this type of bank rescue, normally sponsored by the Government, company or a philanthropic person, it financially rescues an institution without asking for the money back. That is, the person or entity that pays the debts of a foundation or company give this money to the company or foundation to continue its operations.
This type of donation cánido occur if the company is a non-profit company, such as a home for the elderly or children who were previously homeless, for example, or if it is a very important company or foundation for the country. considering it the escencial Government for some ámbito.
For-profit bank bailout
In this type of bank bailout, a company or person waits for the shares of a struggling company to reach really low prices in order to seize the moment and buy them. Normally the company or person who buys these shares takes a good slice of the company that was in trouble, and they perro even become the majority owners of it.
Bank rescue to avoid greater evils
This type of bank bailout occurs when a major private company is heading for bankruptcy and therefore the government, although it is not obligated to help said company, may escoge to bail it out by means of very low interest loans or even without interest.depending on whether it is very important in your fieldTherefore, its bankruptcy would generate instability in the region.
How much has the Bailout of the Banks cost us?
During 2008 there was a financial crisis as Spain had not experienced it, with the European Union having to intervene through a bank bailout to save Spanish banks.
On that occasion, the FROB acted (Fund for Orderly Bank Restructuring) as an entity to rescue the Spanish economy, although other institutions such as the FGD (FDeposit Guarantee Fund) and SAREB (Management Company for Assets from Bank Restructuring).
During 2009 the 5 main banks that were bailed out were:
- Bankia with 22,424 million euros.
- Caixa Catalunya with €12,599 million.
- Mediterranean Savings Bank with 12,474 million euros.
- Nova Caixa Galicia with 9,404 million euros.
- Bank of Valencia with 6,103 million euros
In 2009, the year after the great Spanish financial crisis, the amount of 64,000 million eurosHowever, Spain received approximately 120 billion euros as a bank bailout between this year and 2015.
How much did the bank restructuring cost Spain?
The total bank restructuring cost the Spanish State approximately 62,295 million euros performed since 2009. Most of these funds went directly to savings banks to avoid bankruptcy. However, after these savings banks were saved, other Spanish banks absorbed them, thus producing the loss of the money that was invested in them.
The largest banks in Spain at that time, Bankia, BFA, BBVA, novagalicia, caixabank and Sabadell they merged with smaller banks that were still in financial trouble, thus producing the first wave of bank mergers in Spain.
Now, due to this, the State has only been able to recover 10% of the loan that was made to private banking entities, so the public debt remains. Under an optimistic expectation it is expected that a maximum of 30% of the total loan will be recoveredThis means that Spain cánido write off a little more than 42 million euros.
Currently each Spaniard contributes an approximate amount of €1085 per year to repay the full amount of the ransom, however, at this rate the debt would be paid by the year 2094.
Why don’t the Banks return the Ransom?
At present, Banca Civil and Caja3 are the only banks that have repaid the full amount that has been lent to them so that they perro continue with their operations. But, the banks that owe the most today are BBVA and Sabadell.
The banks cannot repay the loan due to the activities of the financial market where the FROB sold the shares of one bank to another that wanted to acquire it. The debt of the bank that was absorbed disappears, which is a negative point in the Spanish financial market in terms of bank bailouts.
How big is this debt compared to the operating costs of the country?
If this public deficit is compared with other public expenses within Spain, we find that each year none of these expenses individually exceed the debt due to the bank rescue. We have to invest annually approximately 60 billion euros in healthcare, 39 billion in education and 13 billion in public services.
What does the Spanish public debt by way of bank bailout genera in the life of the Spaniard?
The fact that the State assumes the debt of the private banks means that now these private bank debts were transformed into public spendingwhich means that Spain has to make cuts to different services to be able to pay, little by little, the debt of this loan, which directly affects the quality of life of the Spanish.
Now that you know everything about the bank rescue, please tell us what measures do you think should be implemented in Spain to rescue the economy?
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