The Slog has been saying for some time now that Spanish banking instability is as important as its poor sovereign access to the bond markets. I’ve also posted on several occasions to record massive deposit withdrawals in the sector.

Daily Telegraph, 22nd September 2012:

‘A bank-by-bank test of financial stability due next Friday is expected to conclude that Spain’s lenders are dangerously over-burdened with toxic debts and need to be recapitalised, restructured or shut down. The stress test is expected to show a dramatic deterioration since the previous tests were carried out at the beginning of the summer which suggested a €60bn cash injection would be the worst-case scenario.’

The Slog, 3rd September 2012:

‘More support for The Slog’s insistence that a run on the banks has started in Spain, despite the Berlin/Frankfurt/Rome/Reality impasse refusing to pass.’

The Slog, August 29th 2012:

‘Mario Draghi sits anxiously in Frankfurt watching for any signs of crumbling bank foundations in Spain. Reggie Middleton over at Zero Hedge (superb analysis this) agrees with me that the biggest euro-danger at the moment is a bank-run, not a sovereign default…’

When Banking Insolvency Met Madrid Bailout is soon to be a Hollywood movie starring Jim Carrey as Mario Draghi, Meryl Streep as Angela Merkel, John Travolta as the euro, and a special guest cameo from Steven Spielberg as Mariano Rajoy.