“The bank of Spain did not allow spanish banks to go for structured investment vehicles (SIVs).
Also many spanish banks spread their risks by having invested not only in the USA but also in south america, etc…”
That is the official line and one I find very hard to believe. If the law does indeed stop them from from investing in SIVs then I’m sure that they use foreign entities to invest in them. Or they acquire foreign entities who have already invested in them. Or the bankers restructure the SIVs and give them a new name, rate them AAA, so that the Spanish banks can get around the law.
Am I really supposed to believe that while the rest of the world plowed into the American subprime market, the Spaniards passed up the opportunity of ‘easy money’?
With regard to the question as to why Spanish banks are not yet failing there are two major reasons. Firstly, the European business cycle is generally held to be behind the American cycle. Secondly, the laws require far less transparency and honesty in Spain than they do in America. I know that may sound hard to believe but the legal structure and accountancy requirements in business in the US is far more rigorous these days. It was only due to a change in the law last year that required US firms to admit to their toxic debts.
Spanish banks coming unscathed out of the current crisis is as likely as the price of Spanish property doubling before the year end…