Central bank says Spanish lenders cushioned in crisis 06/11/2007 00:00

6 November 2007

Madrid - While the likes of Citigroup, UBS and Merrill Lynch are starting to feel the heat from the US subprime mortgage crisis, the Bank of Spain sought to reassure the investment community that local lenders are well positioned to weather the storm.

In its latest Financial Stability Report released yesterday, the central bank took pains to reiterate that there was no subprime mortgage market in Spain, while local banks are neither directly or indirectly exposed to that market.

It also pointed out that while the non-performing loan ratio in the US subprime segment stands at 15 percent, the ratio of guaranteed housing-loan delinquencies for individual borrowers in Spain at the end of June was only 0.5 percent. This figure in turn compares with a maximum of 4 percent in 1993 when Spain was in recession.

The Bank of Spain said that Spanish lenders remain largely retail and "maintain close ties with borrowers" rather than pass on risk management to third parties, while mortgage-backed securities they have issued are "high quality."

[Copyright EL PAÍS, SL./ Adrián Soto 2007]

Subject: Spanish news