On 24 February, policymakers and industry participants gathered to discuss pertinent issues surrounding Spain’s capital markets. Among the views expressed were those of keynote speaker, MEP Luis Garicano.
Referencing statistics in the recent report by The Bank of Spain, Garicano highlighted the risk of insolvency to small & medium-sized firms (SME) and its implications for the Spanish economy if left unaddressed, “We must act now to stop the solvency crisis before it takes over and is really difficult to deal with.”
He emphasised the need for immediate action, which he broke down into three key pillars. Firstly, he proposed improvements to Spain’s insolvency framework for SMEs. He highlighted that the framework is not providing a suitable level of support to SMEs with future growth potential. He proposed steps to make the process more efficient and agile.
The second pillar was to improve debt restructuring procedures by offering incentives for restructuring. He suggested involving the state in public restructurings and collaborating with banks in a manner where they have shared incentives.
The third pillar proposed was the implementation of state aid. Here Garicano commended the recent steps made by the Spanish government and the announcement of an €11 billion direct aid package.
Optimistic for 2021
Carlos San Basilio Pardo, Secretary General of the Treasury and International Financing, Spanish Ministry of Economy and Business Affairs, in a fireside chat also praised the work of governments and European authorities in facilitating positive financing conditions for companies affected by the pandemic.
He noted a rapid Spanish economic recovery in the latter part of last year and held similar optimism for this year and how this would be supported by new measures aimed at guaranteeing the solvency of companies. Lastly, San Basilio highlighted the importance of reviewing Spain’s fiscal regulatory framework and making it easier to understand and navigate.
The state of Spanish Securitisation
The first panel of the day was on the topic of Spanish securitisation and how it had coped during the pandemic. Heike Hoehl, Executive Director, Syndicate, Santander CIB, noted how the recovery was better than expected given the severity of the impact on the market in the first few months of the pandemic.
Timothy Cleary, Partner, Clifford Chance, echoed similar sentiments noting that after a large dip in the number of transactions in the initial months of the pandemic, from April and May he began to see a return in deal activity.
Cleary also highlighted that he did not see a significant change in the structuring of deals (risk transfer deals) as a result of COVID. However, he did note that investors were avoiding exposure to sectors such as hotels and tourism, as well as loans that are in moratoria or have more recently been subject to moratoria as a result of COVID.
María Turbica Manrique, Vice President, Senior Credit Officer, Moody's Investors Service, commented that she did not yet see evidence of significant deterioration in credit performance across asset classes, but cautioned that the real impact on unemployment and house prices was yet to be realised.
Fernando González, Senior Adviser, European Central Bank (ECB), sharing insights from the banking supervision perspective, said he saw “a very strategic role” for significant risk transfer (SRT) transactions going forward.
Proceedings concluded with polling where the majority of the audience estimated that Spanish securitisation issuance in 2021 would be about the same as in 2020.