Now Reading:

Bad loans behind Spanish bank downgrade


Bad loans behind Spanish bank downgrade


Moody’s said its latest downward assessment of the creditworthiness of Spanish banks is because they face a rising tide of bad loans.

With Spain’s economy again in recession, and its property market a shambles, the credit agency feels the Madrid government is much less able to support troubled lenders.

One bank customer in Madrid said the downgrades were long overdue: “I think they should have done it long ago, because the banks in Spain aren’t in a good position to secure deposits and the accounts of Spaniards and our government should have known that and taken the necessary measures so that this wouldn’t happen.”

The collapse of Spain’s building bubble and the four year property price slump that followed has investors worried the banks’ balance sheets do not reflect the full scale of their losses.

Property related loans total around 300 billion euros, close to a third of Spain’s gross domestic product this year. It is calculated that at least 184 billion euros worth will not be repaid.

Spain’s fourth largest lender Bankia was taken over by the state last week as the government attempted to dispel fears that the bank could not handle the huge losses caused by the property crash.

The fear is more large injections of public funds will be needed to recapitalise the banking system and flush out the losses.

Every story can be told in many ways: see the perspectives from Euronews journalists in our other language teams.

Next Article