Spanish banks have started copying the Barclays fake bank capital trick, i.e. creating money out of thin air and lending it to whoever on condition they buy shares in the bank.
Far as I can see (which may not be very far), this doesn’t matter too much. To illustrate…
Say a bank has the sort of capital ratio advocated by Martin Wolf and Anat Admati, i.e. say 25%, and say that’s all “fake” capital – in the Barclays / Spanish sense. Say the value of the bank’s assets fall by 25%. The bank won’t be insolvent. That’s an improvement on the situation where the bank has a capital ratio of say 5% all of which is “genuine capital”, and assets fall in value by 25%. In the latter scenario, the bank IS INSOLVENT.
(If the above link doesn't work, Google title of the article, i.e. "Next Banking Scandal Explodes in Spain" published by "Wolf Street".)
P.S. (10th June 2016). I’ve changed my mind on this issue. See next day’s post.