MADRID-The two top banks in Spain said over the weekend that they will set aside another $5.8 billion to protect against real estate-linked loan failures. The move comes after the government said on Friday that all banks in the country need to set aside another $38.5 billion to cover potential bad real estate loans.
In February, the government had already required banks to set aside about $70 billion for real estate losses. Banco Santander had already set aside $3 billion after the February request, and now has provisioned another $3.5 billion, the firm said Sunday. Also, Banco Bilbao Vizcaya Argentaria said Sunday it is setting aside $2.8 billion.
In a report released Thursday, BBVA said the country is now in a confirmed recession, with an expected contraction of 1.3% GDP this year. Higher Spanish bond prices are the fault of the deficit not going down as much as the government has stated as a goal, as well as a lack of transparency for how the state will hit that target, according to the bank’s report.
However, the current provisions and regulations imposed by the local government and the Eurozone should still allow for slight growth in 2013, according to the report. “The European economy should stage a timid recovery, while the Euro should continue to depreciate,” the report says. “Financial tensions should wane and spending cuts should prove less onerous thanks to the measures adopted in 2012, as well as oil prices expected to fall slightly. These factors should combine to put the Spanish economy back on the growth track, albeit with internal demand remaining weak.”
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