Spanish banks ask government to help them meet stricter capital requirements

Spanish banks have been calling for the government to turn up to two thirds of deferred tax assets into state-backed tax credits in a desperate attempt to meet stricter Basel III requirements.

Deferred tax assets (DTAs) – which are created when a bank makes losses or writedowns and can be offset against future tax bills when it returns to profit – will no longer count towards bank’s capital levels when the new rules are phased in in January next year.

Spanish banks have currently built up around €50bn in DTAs, and are asking the government to change between €10bn and €30bn into tax credits. The government is obliged to honour this request, but it could add up to three per cent of gross domestic product (GDP) to state debt.