The country's reversal in dealing with its banks is welcomed, but does not go far enough and it does little to restore confidence

AS TURNAROUNDS go, this was pretty quick. Less than two weeks after the Bank of Spain sent its banking supervisors on a quick tour of financial capitals to convince investors that the country's banking system was sound, the government had nationalised the biggest of its struggling lenders and had ordered the country's banks to set aside another €30 billion against bad loans on their property books.

The reversal is welcomed, no doubt. But it does not go far enough and it does little to restore confidence in the Bank of Spain, an institution that at the start of this crisis was seen as a model for regulators elsewhere.

Start with the size of the extra provisions. From the outside it is very difficult to know exactly how deep the holes are in the balance sheets of the country's banks. Analysts and investors reckoned that something between €60-80 billion in additional losses would have to be recognised before there could be any real confidence that the banks' accounts reflected reality rather than optimism. The latest write-downs of another €30 billion, ordered on May 11th, would seem to fill only half the estimated hole. For banks and regulators inSpainto have any hope of convincing the market that they have done enough, they would have to allow for independent and credible valuations of bank's assets.

The debacle will also do lasting damage to the reputation of regulators. Many suspected a few weeks ago that they were allowing banks to recognise only the losses they could afford to cover from existing capital and provisions. That forbearance has now been laid bare—and investors will be wary the next time the Bank of Spain tries to breezily reassure that all is well.