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You Know It's Bad In Spain's Banking System When…

…The regulator bans short sales.

Following our discussion of the collapse of LiberBank’s stock and bond prices as investors quickly identify the next domino to fall in Spain’s crumbling financial system, Bloomberg reports regulators imposed an emergency ban on short selling the stock.

Spanish securities regulator CNMV, backed by the European Securities and Markets Authority, on Monday banned the sale of borrowed shares for a month.

“Market confidence has deteriorated in relation to a part of the local banking sector,” ESMA said, citing CNMV.

The ban prohibits investors from starting new short positions or to adding to existing ones, a person familiar with the information at the regulator said. About 1.4 percent of Liberbank’s shares were on loan short sellers as of May 26, according to latest available data at CNMV.

The result – as always – is a kneejerk spike higher in the stock price (up almost 30% today…

And bonds spiked 4.6pts (selling opportunity?)

Chief Executive Officer Manuel Menendez cleared up all the confusion in a statement sent by the bank late Sunday.

Liberbank is a solid bank as its solvency ratios exceed regulatory requirements and we have a liquidity position that’s among the best within the Spanish traded banks.


Recent volatility in the shares has been affected by external elements, of speculative nature, as there haven’t been any facts that justify such an abrupt change in the price of shares.”

So everything is awesome, don’t worry.

Popular’s bail-in, “has greatly increased the sensitivity of the Spanish market and of international investors,” ESMA said. “There is a risk that possible similar cases could arise in the future.”

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