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Catalonia banks nervous as IMF warns of fallout

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A man walks past a Caixa bank branch in Barcelona, Spain October 6, 2017. REUTERS/Yves Herman

After Sabadell, Spain's third major bank CaixaBank announced plans to transfer its regional headquarters out of Catalonia seperatists leaders threatened to declare independence.


Together, CaixaBank Bank and Sabadell account for nearly 15 percent of Spain's total banking assets.

Their plans to leave Catalonia are likely to deal a serious blow to the region’s finances Guntram Wolff, director of the Brussels-based think tank Bruegel, said.

"It would basically be 13 percent of the Spanish banking system moving its headquarters away from Catalonia to be on the safe side and to continue having access to the ECB [European Central Bank] liquidity window," he told RFI.

Cut off from EU

Both banks, along with other companies based in Catalonia fear they will now suddenly be cut off from the eurozone and, more importantly, from the European Central Bank's emergency liquidity funds if Catalonians unilaterally declare independence from Spain.

A similar scenario faced by firms in the UK after the Brexit vote.

“They have not moved out of Catalonia, the only thing they have done, they have changed nominally where they are based," Marti Anglada, the representive for the Catalan government in France said.

"They did this so that when next week there is an independence in Catalonia, they will still be able to maintain their links to the European Central Bank. Their central headquarters are and will remain in Barcelona, for both banks,” he says.

Relocation a smokescreen

Anglada may downplay the impact of firms wanting to relocate elsewhere, for Wolff however, "this doesn't solve the problem that these banks and all of the other Spanish banks are still heavily exposed to Catalonia," he argues.

"If Catalonia separates and there's turmoil, this affects all of these banks on their assets side right, all of these banks are being exposed including the big Spanish bank Santander, BBVA and so on, they all have business and activity in Catalonia so will therefore one way or another be affected."

These concerns were echoed by the International Monetary Fund (IMF) which, on Friday, said that the current tensions could hurt business confidence.

Back to the brink

All of this comes as Spain is recovering from a painful economic crisis.

Things could get worse if its credit rating goes down, which the IMF warns it will. On Thursday, Spain's borrowing costs took the biggest leap they have done in seven months.

"Definitely it will have an impact on Spain's credit rating," adds Wolff, "including on the issue that Spanish debt is Spanish debt and not Catalonian debt."

Independence supporters have long complained that they pay too much in taxes and they get little in return.

"We have had very bad treatment from the central government," explains Marti Anglada.

"We are producing one fifth of Spain's riches, and the rate of investment is only 9-10%."

However, a unilateral declaration of independence by Catalonia won't necessarily grant it total independence according to Wolff:

"Spain will continue to exercise its authority over the police and supervision of banking control. The question is at what stage would the unilateral declaration transform into a defacto separation from Spain?"

Italy next?

One country in Europe which is following the events in Spain closely is Italy.

It's gearing up for a referendum of its own, in Lombardy and Veneto, two of the country's wealthiest regions, on October 22.

"What we're waiting to see is whether the political trouble in Catalonia is going to favour the yes referendum in Lombardy and Veneto or favour the no," economist Marco Leonardi told RFI.

Although Italy's referendum is focused on gaining more autonomy than actual independence, Leonardi suggests that given the crisis sparked by Catalonia's referendum, Italians are likely to think again about going down the same route.