adminMADRID — The weight of bad loans held by Spain’s banks grew in May, the Bank of Spain said Thursday, a sign of the difficulties facing the bailed-out banking sector. Doubtful loans rose to 170.2 billion euros ($223.6 billion) or 11.21 percent of all loans in May from 167.1 billion euros or 10.87 percent of all credits in April, the bank said.
Bad loans began to rise at all Spanish banks after the collapse of a decade-long property boom in 2008. The bad loan ratio reached a record high of 11.23 percent of all credits in November 2012.
The International Monetary Fund warned Monday that Spain’s financial sector still faces risks even though it has been strengthed since the government last year set up a “bad bank” called Sareb charged with taking on the stricken banks’ toxic assets.
“Actions to recapitalise parts of the banking sector and the asset transfers to Sareb have provided an important boost to the system’s liquidity and solvency,” it said in a report.
“Notwithstanding this progress, risks to the economy and hence to the financial sector remain elevated,” the report added.
Last year, the eurozone agreed to finance a rescue of Spain’s banks, swamped in bad loans since a property bubble imploded in 2008 with broad and devastating economic consequences.
Spain has so far withdrawn 41.3 billion euros from the eurozone rescue loan to recapitalise its banks. As a condition of the eurozone rescue, Spain set up Sareb, a “bad bank” which will try to sell the bad assets it buys from lenders for a profit.
Spanish banks’ bad loans ratio fell in December 2012 for the first time in 17 months as banks began offloading troubled assets to Sareb.
The ratio rose again in January, fell again in February following more toxic asset transfers to Sareb before resuming its climb in March. — AFP
Online Reporter