Spanish banking system posts record proportion of bad debt

THE TROUBLED Spanish banking system recorded an increase in its proportion of bad loans during October, rising 0.3 percentage points to 13 per cent.

The proportion of non-performing loans in the financial system has now reached another record high, raising further questions about the health of the country’s banks.

During October, total aggregate lending in Spain fell to €1.469 trillion (£1.23 trillion), but the share categorised as “doubtful debtors” increased to €190.97bn, a €3bn increase from September.

In a recent assessment of the Eurozone’s recovery, Capital Economics’ Ben May noted that such debtors are likely to be an ongoing hindrance to economic growth: “Non-performing loans – which have risen sharply – are unlikely to have peaked, especially given the pressure is growing on some banks to declare hidden losses in advance of next year’s European Central Bank asset quality review and stress tests.”

According to the Bank of Spain, doubtful debtors are classed as any credit for which an interest payment or some portion of the principal owed has been overdue for three months.