Moody's cautions on Spanish banks

RATINGS agency Moody&rsquo;s Investors Service yesterday expressed concern that Spanish banks are failing to recognise the enormity of their losses, and predicted that customers would default on around &euro;108m (&pound;101m) worth of loans before the recovery begins.<br /><br />The firm said in a report that current bad-debt provisions would cover less than half of the predicted losses, which would impact the Spanish banking sector for years to come.<br /><br />&ldquo;We remain concerned that many banks appear to be avoiding recognising the true scale of the asset quality deterioration in their books, which could result in the banking sector remaining weak unless this is addressed more decisively,&rdquo; said Moody&rsquo;s analyst Maria Cabanyes.<br /><br />The firm said the outlook for Spanish banks remained negative, but stopped short of downgrading its ratings for the sector because of the buffer provided by the government&rsquo;s restructuring fund. The fund initially has a capital of around &euro;9bn, but can be expanded to &euro;99bn if required.