Spain Banks To Raise Buffers Amid Reform
Spanish banks will be forced to set aside extra funds as part of drastic reforms announced by the government to protect the fragile economy.
Banks will need to increase their cover on sound property loans from 7% to 30% and separate real estate assets from their balance sheets.
It is the second banking reform passed by the country's conservative government since it came into power in December, and comes just days after it was forced to part-nationalise Bankia, the country's fourth-largest bank due to the effect of the bursting of the property bubble.
The move will provide an extra 30bn euros (£24.1bn) financial cushion, taking total provisions against real estate assets to 137bn euros (£110bn), worth 45% of the banks' portfolios.
Economy minister Luis de Guindos said public funds available for the banks would be less than 15bn euros (£12bn) and would not have any effect on the country's deficit.
Two independent auditing firms will be responsible for valuing banks' exposure to the nation's collapsed property sector, ministers told a news conference after a cabinet meeting.
Banks which are unable to raise the extra capital will have access to a five-year loan, via a convertible bond, from the state at an interest rate of 10%, they added.
The country will also make its rental market more flexible in order to incentivise banks to offload their real estate assets.