The Minister of Finance was decisive, and after a single “one-on-one” discussion with me, he gave the approval for the Central Bank to proceed with implementation of the intervention plan. The rest is history. The newly appointed directors and the managing agents, with the Central Bank in the background, were able to stabilize the bank within a short period of about 2 weeks. Thereafter, within a few months, the bank was able to infuse new capital and thereby qualify to exit from the close monitoring system of the Central Bank, in less than a year. This episode will be an important lesson for those who wish to study the way Governments and Central Banks should cooperate to bring stability, in the face of any instability in the banking sector. It also confirmed the validity of an important annotation in Exter’s Report. Let me quote once again from the first Chapter of his Report: “Many of its (Central Bank’s) powers may go unused for long periods, because they are designed for particular situations, some of which may never arise. Others are intended for use only in crises or to forestall a crisis, but prudence dictates that they be included now, so that they will be at hand in case of need. …”.
But in certain cases I believe that some tax claims can be of a higher value and more liquid than in others. In other countries, doubts about the situation in the public sector may be greater and the question arises as to whether or not tax claims are actually liquid or have the capacity to absorb losses in real time. Because if you want them to be accepted as liquid assets, they must be immediately available. And call me old-fashioned, but I think that hard cash is the best form of capital. Where does Spain sit on the spectrum that you have described? The European Commission will comment on that from the perspective of public aid in its evaluation. In our Comprehensive Assessment last year we were not very enthusiastic about it (DTAs) but in the end we accepted it on legal grounds. But the most important thing for me is to have a level playing field and, as such, any legal clarification that arises as a result of the European Commission’s assessment will be welcome. The Spanish government states that this was designed in collaboration with the EU institutions, given that we were under the financial assistance programme for banks, and it appears to be rather calm. That’s what I said, we have to look at how things were done, under what circumstances and what its real liquidity is; it will depend on government liquidity, tax revenue etc… And there are very different tax arrangements involved.