Cuatrecasas

Maria João Ricou and Manuel Requicha Ferreira, Cuatrecasas Gonçalves Pereira

By Maria João Ricou, managing partner, and Manuel Requicha Ferreira, partner, Cuatrecasas Gonçalves Pereira

Spain remains one of the largest European markets for non-performing assets – both for its non-performing loan (NPL) and real estate-owned (REO) portfolios – and is a preferred jurisdiction for international investors. The provisioning requirements of credit institutions for real estate exposures and the creation of the Spanish bad bank, Sareb, were the real catalysts for the change in mindset regarding the transfer of NPLs. All Spanish financial institutions, even the most solvent ones, accumulated large amounts of NPLs – around €300 billion ($347 billion) in total – during the real estate crisis and financial turmoil. All international credit funds and distressed investors landed in Spain several years ago and many of them set up their own asset management platforms. During those years, there was no other jurisdiction in continental Europe that could offer the opportunities and returns available in Spain (until recently, Italy).

The European Parliament recently passed a new regulation on securitisation, which is part of the capital markets union action plan. Regulation (EU) 2017/2402 of the European Parliament and Council, of December 12 2017 (the Securitisation Regulation), establishes a general framework for securitisation and creates a specific framework for simple, transparent and standardised securitisation. Its aim is to promote a safe and liquid market for securitisation. An amendment was also implemented relating to the regulation on capital requirements. Its purpose is to make the capital treatment of securitisations for banks and investment firms more risk-sensitive and to reflect the specific features of simple, transparent and standardised securitisations.

In July 2017, the Spanish government announced the Extraordinary Road Investment Plan (Plan Extraordinario de Inversión en Carreteras or PIC). This plan involves investing €5 billion ($6.2 billion) to construct 2,000 km of highways over a four-year period (2017 to 2021).

Like other European countries, Spain has not fully developed the regulation to implement the Markets in Financial Instruments Directive (Mifid) by January 3 2018.