IMF says Spain's financial reform on track, challenges ahead


Spain's financial sector reform is on track and all deadlines have been met so far but difficult steps still lie ahead while risks for the economy and the country's lenders remain high, the International Monetary Fund said on Wednesday.

The report follows European Commission approval of the recapitalization plans of four nationalized Spanish banks, under a 100 billion euro European credit line agreed in June.

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"The financial sector program is on track so far, with all deadlines met. However, the most challenging steps lie ahead, especially those related to implementing bank restructuring plans and making the asset management company effective," the IMF said in its first progress report on the financial reform.

It added that bank liquidity remains a risk that is only mitigated by extensive support from the European Central Bank, while non-viable lenders should be quickly wound down and mergers that do not generate value should be avoided.

Economic risks remain high, with further headwinds expected from private-sector deleveraging, tight credit, falling house prices, fiscal consolidation, weak confidence and high uncertainty, it said.

(Reporting by Julien Toyer; Editing by Fiona Ortiz)