Spanish banks face up to bailout with worst bad-loan ratio

The number of bad loans listed at Spanish banks jumped to a record high level in June, according to figures released Friday by the Bank of Spain.

The historic figure was registered during the same month that the Spanish government asked the European Union for a bailout for its financial institutions.

The value of dubious credit jumped to 164.36 billion euros in June, which is equal to an unprecedented 9.42 percent of the banks’ total loan portfolio, central bank said.

This figure was up sharply from the 8.96-percent share of total loans recorded in May, and was the largest bad-loan ratio recorded since the central bank began compiling the series of data in 1962.

Moreover, the increase in terms of hard currency in delinquency between June and May, which was 8.387 billion euros, also represents a milestone in the Bank of Spain records, and the second-worst figure in the series. Only in July 2009 did the amount of delinquent credit rise more in one month — by 9.346 million.

The request for the first tranche of the rescue fund will be sent shortly"

In May, the government announced new rules for banks to cover their risks linked to property loans.

Both Reuters and AFP quoted on Friday an Economy Ministry official as saying that the Spanish government will soon ask the EU for the first payment of a bank recapitalization plan to help prop up Bankia and other banks now under state control — Catalunya Caixa, NovaGalicia Banco and Banco de Valencia.

In June, Spain received a pledge from Brussels to receive up to 100 billion euros of European money to boost the capital of lenders which are unable to attract investors, sell assets or generate enough earnings to offset losses.

“The request will be sent shortly,” a spokeswoman for the Economy Ministry told both news agencies. “It is being worked on,” she added while declining to put a date or exact figure of the amount that will be requested.

The spokeswoman, who was not identified, explained that the Bank of Spain was currently performing its analysis of the situation and would then request the amount it believes that is needed.

“The Bank of Spain is doing its analysis and that report is for the nationalized banks, so depending on that analysis they will see what request they need to make,” she said.

Bankia reportedly needs up to 19 billion euros.

At the same time AFP quoted a spokeswoman for the euro zone’s bailout fund, the European Financial Stability Facility (EFSF), as saying that some 30 billion euros has already been set aside in case of Spain’s urgent request.