Capitalization

The impairment of the employment and income indicators stemming from the COVID pandemic has brought questions about the health of banks. Despite the complexity of the current situation, it should be noted that the fundamentals of the banking system as a whole show strength to face the economic consequences of the pandemic.

The Spanish banking sector has gone through one of the most comprehensive and thorough restructurings in the eurozone. This paper reviews the successive measures taken to reform the banking sector since the crisis began, particularly those adopted from February 2012 onwards to adjust asset value, the signing of the Memorandum of Understanding with the Eurogroup which marks out the route-map towards the end of restructuring, and the changes and adjustment processes which have been introduced to comply with this, culminating in the recapitalisation of part of the sector with public funds. It also analyses the competitive scenario in the sector after the reform, and takes a view on the measures most recently adopted to encourage an appropriate solution for credit refinancing, as well as the banking sector’s capacity to support the Spanish economy’s incipient recovery.