What Catalan crisis? Independence risks stability but IMF refuses comment

Catalonia’s bid for independence from Spain has prompted vast civil unrest, banks to leave the region and a sharp rise in borrowing from the European Central Bank but IMF representatives ducked the topic on Wednesday, instead saying how strong the Spanish banking system was.

  • By Owen Sanderson
  • 12 Oct 2017
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Dattels: no comment on Catalonia
The IMF’s Tobias Adrian, financial counsellor and director in the monetary and capital markets department, yesterday said that the Spanish banking system was “resilient and strong”, and that “the basic fundamentals of the country are favourable for financial stability”. 
His positive remarks came despite the tense stand-off between the Spanish government and Catalonia over the region’s vote on independence, which has already seen banks consider leaving the region and boost their borrowing from the European Central Bank.

Asked for a comment on the emerging situation, Peter Dattels, deputy director in the monetary and capital markets department at the IMF, would only say that his institution “hopes the situation can be resolved smoothly and in a timely manner… that’s all we have to offer on the Catalan situation”.

Following the vote on independence called by the Spanish region’s government on October 1, major banks and companies based in Catalonia have started to mull moving their headquarters elsewhere in Spain, to avoid disruption if the region becomes independent, since this would push them outside the European Union. 

Sabadell confirmed last week it would move its HQ from Barcelona to Alicante, while CaixaBank will move to Valencia, though neither firm has yet started relocating staff and operations. The increased take-up of the ECB’s medium term refinancing operation on Wednesday — €21bn rather than the level of €3bn-€7bn which has prevailed since July — is widely seen as driven by Spanish banks shoring up their short term funding, though the central bank does not break down take-up by country or institution.

Debt remains resilient

Spanish government debt has remained fairly resilient following the vote. Generic 10 year Bono yields rose 18bp, but have since tightened again, and came in further following Catalan president Carles Puigdemont’s speech on Tuesday evening announcing that the Catalan government would “suspend” the results of the vote for “a few weeks”, pending talks with the Spanish government.

“The speech would appear to ratchet down tensions for the time being and markets are likely to take what stops short of an immediate declaration of independence from Catalonia as a positive,” said RBC’s European economist Cathal Kennedy in a note to clients.

A source in the Catalan finance ministry told GlobalMarkets’ sister publication GlobalCapital that it was police violence during the vote that worried markets, not the possibility of independence for the region, a view shared by few international investors.

“It was the aggression against ordinary citizens from the Spanish government that rattled the spreads on Spain’s Bonos, not the assurance that we would implement the results of the referendum.”

  • By Owen Sanderson
  • 12 Oct 2017

All International Bonds

Rank Lead Manager Amount $m No of issues Share %
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1 Citi 67,814.25 217 8.37%
2 JPMorgan 64,786.86 230 8.00%
3 Barclays 55,262.22 183 6.82%
4 Bank of America Merrill Lynch 48,274.42 172 5.96%
5 Deutsche Bank 43,665.36 159 5.39%

Bookrunners of All Syndicated Loans EMEA

Rank Lead Manager Amount $m No of issues Share %
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1 Bank of America Merrill Lynch 6,217.19 6 15.22%
2 Deutsche Bank 3,538.77 6 8.66%
3 Citi 2,570.45 7 6.29%
4 Commerzbank Group 2,532.05 5 6.20%
5 BNP Paribas 1,798.71 8 4.40%

Bookrunners of all EMEA ECM Issuance

Rank Lead Manager Amount $m No of issues Share %
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1 UBS 998.25 3 12.17%
2 Citi 693.55 2 8.46%
3 Morgan Stanley 606.80 4 7.40%
4 Bank of America Merrill Lynch 509.34 3 6.21%
5 Jefferies LLC 409.89 4 5.00%