Spanish bad bank loans hit record high in July

MADRID: Bad loans held by Spain’s crisis-torn lenders soared to its highest level in 50 years in July with nearly one in ten loans deemed at risk, official data showed Tuesday.

The value of loans at risk of not being repaid climbed to 169.3 billion euros in July or 9.86 percent of the total, up from 164.4 billion euros, or 9.42 percent of the total, the previous month, Bank of Spain figures showed.

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 sent the jobless rate soaring to nearly 25 percent.

Last month the government 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.

Spain had agreed to push through the reform as a condition for receiving a banking sector rescue loan of up to 100 billion euros ($130 billion) from its eurozone partners.

Prime Minister Mariano Rajoy’s conservative government has put in place steep spending cuts and hiked taxes to try to prevent Spain from needing a full-fledged bailout for its economy like the ones received by Greece, Ireland and Portugal, which come with detailed conditions and regular inspections.

But with Spain facing a worsening recession and looming debt repayments including about 30 billion euros in October, investors believe the country will soon seek a full-blown bailout.

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