Spain bad bank makes toxic-loan ratio drop | Business| Economy and finance news from a German perspective | DW | 18.02.2013
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Spain bad bank makes toxic-loan ratio drop

Spain's central bank has reported the first drop in lenders' bad-loan ratio in 17 months. While this is good news at first glance, the development is primarily due to the creation of a bad bank mopping up toxic credits.

The share of bad loans on the balance sheets of Spanish lenders fell in December after rising for 17 months in a row, the Bank of Spain reported on Monday.

The ratio of doubtful credits, mostly mortgages, dropped to 10.44 percent of total loans from a record of 11.38 percent in November.

The central bank made it clear that the development was not a result of the economy picking up in the country, but rather a direct consequence of the recent creation of a bad bank called Sareb which had been absorbing toxic assets in order to sell them separately to investors.

Economy still in the doldrums

"As expected, the transfer of assets to the Sareb has led to a significant decline in the total level of doubtful loans on the overall balance sheets of credit entities," the central bank said in its latest report.

Spain has been shoring up its banks which ended up in havoc in the 2008 property market crash. Lenders have been able to use a European Union rescue loan of up to 100 million euros ($134 million).

The southern European eurozone nation is still struggling to leave behind its second recession in three years, with unemployment having surpassed the 26-percent mark.

hg/kms (dpa, AFP)