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Spain’s ‘Bad Bank’ president takes page from ‘The Godfather’

Fortune 100 Most Important WomenFortune 100 Most Important Women
Belen Romana (red top) interviewed by Nina Easton at the Fortune Most Powerful Women London Gala Dinner on Monday, 23rd June 2014, London, UK at the Rosewood Hotel, London. Fiona Hanson—AP

Belén Romana, the president of Spain’s “bad bank,” stood up to aggressive American hedge funds in the wake of the country’s financial crisis by sticking to one simple principle: It’s not personal, it’s business.

On Tuesday at Fortune’s Most Powerful Women international conference in London, Romana said she worked effectively with hedge funds when Spain’s real estate market was tanking by establishing strict rules before making deals with investors. Romana, who became president of government-owned Sareb in 2012 when plummeting Spanish home prices pushed many banks to the brink of collapse, is responsible for managing $50 billion in assets from Spanish banks that went belly up during the country’s housing crisis.

“When a market is suffering from a credit crunch, the first ones to come in are the hedge funds, because they have a riskier approach,” Romana told Fortune’s Washington Columnist and Senior Editor Nina Easton in an exclusive interview. “They [American hedge funds] are our clients and our investment base. I have come to understand their position. It is nothing personal, they maximize their profits… When you are born in a weak position, in a difficult position in your country… You have to be a respected agent in the market and to be respected you need to understand the market and set your own processes.”

In 2012, the European bailout relocated roughly 200,000 assets to Sareb, including loans to developers, housing, commercial buildings and land. Now, Romana has 15 years to dispose of all the assets with the goal of maximizing prices. There is no question that she has her work cut out for her. Spaniards bought roughly 900,000 homes annually during the peak of Spain’s housing boom around 2006 and 2007. That figure dropped to 300,000 in 2013.

Yet the good news for Romana is that the latest housing data from Spain is promising. New mortgage lending in Spain rose 2% in March from a year earlier marking the first increase since 2010. Home sales have also increased nearly 50% in the first quarter. Romana told Easton that although Europe is “not out of the woods,” economically, Spain is becoming a more attractive place for global investment.

“Things have changed dramatically,” she said. “The direction has changed. We were going downwards and that’s not the case anymore…There are many deals in Spain closing right now in many different areas.”

Spain took a €41.3 billion bail-out from the euro zone to recapitalize four of its weakest banks in 2012-3, and was one of the biggest beneficiaries of the European Central Bank’s promised to do “whatever it takes” to keep the euro zone together. But there are still signs that the banks aren’t cured. In a survey published Monday, over a third of Spanish banks said they might need to raise more capital after the ECB’s ongoing Asset Quality Review and subsequent stress test.

The former director general of the Spanish Treasury is also facing an obvious reality: unemployment is a drain on the Spanish economy. More than 25% of Spaniards are currently unemployed compared with 43% of residents under the age of 30. Romana called unemployment a “heavyweight” for any society and encouraged Spain’s youth to travel and expand their horizons as a way to open up the Spanish economy.

“It [Unemployment] is one of the clear problems we need to solve and face,” Romana said. “There are a number of young people leaving Spain and going abroad and that is not a negative thing… We need to speak more languages and travel much more than we do.”

Romana added that she “envied the Dutch” and their wide-reaching presence around the globe – quite a compliment given that Spain is still smarting from a 5-1 thrashing at the hands of the Netherlands in the World Cup.

As difficult as Romana’s task to revive the Spanish economy may seem at this point, things could be worse. The No. 5 European economy is experiencing one of the more robust recoveries in the European Union since the crisis. In the first three months of this year, Spain’s economy grew double the quarter-on-quarter rate seen at the end of last year.