Spain's bad loan ratio hits record

The central bank says level of loans considered at high risk of not being repaid reached 10.7 per cent of total loans.
Last Modified: 19 Nov 2012 11:47
The level of Spanish banks' bad loans has risen steadily over recent months [EPA]

Spanish banks' bad loans have surged to a new record level in September with more than one in ten classed as high risk.

In a report released on Monday, th Bank of Spain said the amount of unpaid loans had climbed to the record level of 182 billion euros (231 billion dollars) or 10.7 per cent of total debt, up from 10.5 per cent in August. Year-on-year, the increase was 42 per cent.

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.

Spain's unemployment rate has risen to 25 per cent, leaving a growing number of individuals and companies unable to repay their debts.

A surge in unemployment has also driven a wave of evictions of defaulting mortgage-holders.

The level of Spanish banks' bad loans, a major concern for financial markets as an indicator of the country's financial health, has risen steadily over recent months.

The conservative government last week announced a two-year halt to evictions of the most desperate homeowners following an outcry over suicides linked to evictions.

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 up to 59.3 billion euros of extra 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 so-called "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.


Topics in this article
Featured on Al Jazeera
An innovative rehabilitation programme offers Danish fighters in Syria an escape route and help without prosecution.
Street tension between radical Muslims and Holland's hard right rises, as Islamic State anxiety grows.
Take an immersive look at the challenges facing the war-torn country as US troops begin their withdrawal.
Ministers and MPs caught on camera sleeping through important speeches have sparked criticism that they are not working.
About 500,000 participated around the globe in the Peoples Climate March, and Al Jazeera spoke to some in New York.
Separatist movements in Spain, Belgium and Italy may face headwinds following Scotland's decision to stay in the UK.
A fishing trawler carrying 500 migrants across the Mediterranean was rammed by another boat, causing hundreds to drown.
Anti-immigration Sweden Democrats party - with roots in the neo-Nazi movement - recently won 12.9 percent of the vote.
Palestinian doctor who lost three daughters in previous Gaza war is fighting to bring 100 wounded kids to Canada.