Spain’s banks told to devalue property

Spanish banks have been told by the Bank of Spain to devalue the housing assets on their books by 20 per cent, El Mundo reported yesterday, citing sector sources.

The Bank of Spain was not immediately available for comment.

Spain’s banks hold property worth an estimated 100 billion euros (S$195.2 billion), the newspaper said, taken on over the last couple of years as property companies went bankrupt and their creditors forced to mop up their unsold assets.

Analysts are concerned the country’s banks have been keeping a lid on potential losses by valuing the homes on their books at pre-crisis levels, while real property prices have dropped by more than 14 per cent from their high in 2007.

Spain’s second largest bank BBVA shocked investors at the end of January when it reported full-year earnings with higher than expected provisions, raising broader doubts about Spanish banks’ ability to absorb a property market crash.

Source : Business Times – 11 Feb 2010