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Bank of Spain Reports $223B RE Asset Risk

MADRID-Spanish banks have taken on a massive amount of real estate properties, exposing them to the possible problem fluctuations of the market.

By Allan Saunderson | Updated on April 05, 2010

MADRID-A Bank of Spain report on financial stability, issued in late March, estimated total accumulated real estate assets on bank books worth nearly $81 billion, and said the entire potentially problematic exposure in real estate could reach $223 billion.

“Exposure to the construction and property development sectors implies a significant risk for the Spanish banking system,” the central bank said in a report. Spanish banks have taken increasing numbers of properties onto books due to debtor awards, payments in kind and purchases and these amounted to $80 billion at the end of December. The BoS said this activity is a habitual tool when dealing with loans related to construction and real estate development because guarantees comprise physical assets. The bank also recognized that the figure could increase.

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