Spain is not Ireland, and things are getting better in the long term when it comes to the banks and Europe overall, H. Rodgin Cohen, senior chairman at the law firm Sullivan & Cromwell, told CNBC Wednesday.
"That has started with recognition of the significance of the problems," he said. "Basel III, both the capital and the liquidity requirements, some things that are going on internally as a result of supervisory actions in each of these countries — and Spain is an excellent example."
While Spanish 10-year notes and the bond market might be telling a different story, Cohen said: "Spain is not Ireland." Spanish banks Banco Santander and BBVA "are ... quite solid institutions and they've not been forced as banks in other countries have been to go out and do very speculative things."
Still, when the markets are saying one thing, like what the 10-year notes are reflecting, it's hard not to worry, he said. "But when you look at the underlying issue of the strength of these leading Spanish financial institutions, to me that would be a strongargument against further deterioration.
So do Europe's problems end in Ireland?
"I would hope so. I think the response of the EU to Ireland is essential because if at the periphery there are serious problems, it can obviously infect the rest of the body," he said.
In the meantime, if Spanish banks wanted to make a statement of Spain's strength, they could certainly try to do an equity raise right now, even if they don't need it.
"It's certainly an interesting proposition ... it would make a statement," Cohen said.
For more on H. Rodgin Cohen, read David Faber's post:
- In Bailouts, Spain Will be 'the Biggie': Strategist
- Spain and Portugal: Who Will be Next to Fall?
- Irish Unveil 4-Year Plan to Clawback $20 Billion
"The Strategy Session," hosted by David Faber and Gary Kaminsky, airs weekdays at Noon ET on CNBC.