Spain’s banking system solvency was in need of protection, according to IMF

The International Monetary Fund warned that proactive vigilance was needed in order the hard won solvency of Spanish banking system to be preserved. During its most recent visit to Euro zones fourth largest economy, IMF experts noted that decisive action had been taken to clean up Spanish banks, but yet financial fragmentation still continued to be an obstacle.

The banking crisis in the country has managed to vaporize billions of euros of investments, as shares in nationalized lender Bankia tanking almost 93% during the last year. Earlier in June the European Union approved a 100-billion euro aid package for Spanish banks.

“Losses need to be promptly recognized and distressed assets sold to avoid tying up resources that could flow to more productive uses. Recent euro-area actions have reduced tail-risks and financial market stress. Nevertheless, these initiatives have not been sufficient to reverse financial fragmentation, fix the broken transmission mechanism, and deliver higher growth and employment, neither for the euro-area nor Spain. Of particular importance to Spain would be moving faster to full banking union, the IMF said, cited by CNBC.