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Home News Spanish bad bank loans hit record in August

Spanish bad bank loans hit record in August

Published on 18/10/2012

Bad loans at Spanish banks, a major source of concern to financial markets, surged to a new record high in August, with one in ten loans deemed at risk, official data showed Thursday.

The bad loans ratio rose to 10.51 percent of the total in August from a revised 10.1 percent in the previous month, the Bank of Spain said in a report.

Preliminary data released last month by the central bank had put the bad loan ratio in July at 9.86 percent.

Overall, 178.6 billion euros ($234 billion) in loans were at risk of not being repaid in August.

Up sharply from a share of 8.96 percent of total loans in May, it was the highest bad loan ratio recorded since the central bank began compiling the data in 1962.

Spanish banks have been weighed down with rising bad loans and repossessed real estate since the collapse of a property bubble in 2008, which has caused defaults by builders and mortgage holders to soar.

Eurozone authorities agreed in June to extend a rescue loan of up to 100 billion euros to aid ailing Spanish banks.

An audit by US consultancy Oliver Wyman concluded that Spanish banks overall needed to raise an extra 59.3 billion euros of capital, or 53.7 billion euros after adjusting for the effect of certain mergers and fiscal procedures.

But the government has said it believes it will need to ask for a lower amount, about 40 billion euros, from the bailout fund, since some of the banks could raise capital themselves.

In August Spain approved the creation of a “bad bank” to buy troubled property assets and bad loans from lenders in a bid to clean up the financial sector and restore investor confidence in the economy.