Banks And Economy Integrate Into Ico Credit Stripping System
2021-02-22 | by CusiGO
Negotiations on the cancellation of ICO funding have reached a deadlock. According to people familiar with the matter, the negotiations are deadlocked: banks refuse to accept ICO guaranteed loans with a loss of 20% – 30%. The remaining 70% – 80% will be borne by the state. The bank argued that due to the long-standing shortage of ICO credit, the maturity date has been extended, so there is no need to withdraw now. They would rather wait a year to see if SMEs have improved and aid has decreased. However, economics believes that we must seize the window of opportunity and do it now. The financial industry has also criticized the exclusion of companies that have not applied for ICO loans.
Negotiations are under way between the banking employer (AEB), the former banking employer (ECSC), the Ministry of Finance and the Bank of Spain, although there are individual bank to bank meetings with the Ministry of finance. The idea of economics is to reach an agreement sometime next week to distinguish which companies can get assistance according to their financial situation and size. All parties realize that these problems must be solved through the information and screening provided by the institutions, Because the accounting of small and medium-sized enterprises is not always reliable.
However, the debate is deadlocked. These entities oppose the government’s intentions and want flexibility so that they can determine the amount and target of aid. They also warned that failure to do so could lead to a credit crunch. Another focus of this debate is the opportunity to do so now.
In the case of the banking sector, the terms of credit backed by the official credit institute (ICO) have improved significantly: the shortage has widened to two years and the repayment period has been extended to eight years. They point out that there is no urgent need to resolve whether the ICO will be paid for this restructuring.
On the contrary, economics believes that we must take advantage of the advantages that we can now take advantage of. Maybe within a year, the economy will improve and the cost of restructuring will be reduced. But it’s not clear what will happen before that, and some people may not be able to stand it. 2012 came too late, and today, with the current financial situation backed by the European Central Bank, countries can take on that responsibility.
Some consultants, who asked for anonymity, criticized the government for focusing the discussion on the cancellation and refusal of direct assistance “at least for hotels and hotels.”. In addition, they believe that it is wrong to think that all business problems will be solved only by companies that ask for ICO credit. They pointed out that limiting debt relief was discriminatory because it was a form of aid, while those who chose to use liquidity and resources to tide over the crisis since March were not supported.
Finally, the bank points out that if a generous divestment plan is implemented, “an effect called overdue payments will be created,” and the list of companies requesting divestment can be extended even if it is not needed.
Some of the banks consulted thought there would be divestment and had little confidence in the negotiations. “The government has the Government Gazette,” they recalled. They added succinctly: “legislation against banks is politically well known.”
Financial sources are worried that the reserve ratio will rise, the solvency of banks may be damaged, and regulators are demanding banks’ profitability and more capital. But they believe that the government has publicly said it will take “no retreat”.
“The focus of the discussion is whether we foresee damage,” one explained. On the economic front, there is a clear consensus on excessive debt, as pointed out by the Bank of Spain, so the Ministry believes that we should move forward to avoid the slightest doubt about financial stability.
Government sources say agencies are pushing for a balanced board of directors, as they did when seeking 100% credit guaranteed by the ICO. But it’s important that banks take some action on loans so that they can make loans responsibly, rather than passing on all bad loans to the state. In the end, institutions have to accept that they take 20% to 30% of the risk. It’s also true that the government initially wanted to reduce the amount of guarantees by $20 billion, and now it’s $90 billion.
Economics also believes that divestment can encourage enterprises to continue to operate. He claimed that the bank provided the credit they wanted, free from their constraints, and met the conditions they considered necessary.
Financial sources believe that this is not the time to question the Spanish banking industry, because no one in Europe has questioned the entity of the Spanish banking industry. If governments want to lighten the burden on the sectors affected by the restrictions, they insist on doing so with their budgets. They remember that the barrier to business continuity is income, not liquidity or debt. Therefore, direct assistance is needed.
A tricky question on the table is who will decide whether to pay a company a purchase fee. Bank sources, who asked to be anonymous, pointed out that the Ministry of economy should not be sure who got help and who didn’t. “it’s our job to be responsible for the risk,” they said. They argued that an overall framework could be established for companies eligible for assistance or refinancing, but that “all companies with certain characteristics should not be automatically required to release part of their debt.”.
Among banks, it has been pointed out that this will greatly increase the reserve ratio. “In addition, other companies without ICO credit may be in trouble and institutions will have to help them, which will further increase the reserve ratio,” they stressed.