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Spain to Set Rules for Banks to Offload Real Estate

May 03, 2012

Spain will set rules in the coming weeks allowing banks to offload real estate, whose valuations on lenders’ books are in line with market prices, Economy Minister Luis de Guindos said.

De Guindos said the plan will be voluntary and each bank may set up its own vehicle into which it can transfer real estate assets that have already been written down. He said provisioning levels of 80 percent for land and 65 percent for unfinished property were sufficient, allowing banks to offload the assets without generating additional losses.

“In general terms, these levels are considered market prices,” he told reporters in Barcelona today. He declined to comment on what would happen if appraisers of the vehicles price the assets below their current book value.

Less than three months after tightening legislation to force lenders to recognize deeper real estate losses, Spain is seeking new ways to convince investors that bank losses won’t overburden public finances. De Guindos met with European Competition Commissioner Joaquin Almunia yesterday in Brussels, where de Guindos said they discussed issues including lenders.

The government says the rules approved in February forcing banks to set aside an additional 53.8 billion euros (70.7 billion) in buffers and provisions are enough. The banks have until the end of the year to make the provisions.

In an April 20 research note, Goldman Sachs Group Inc. estimated that 58 billion euros of further losses, on top of those stipulated by the February decree, would be needed. Market concerns remain over the “scale of unrecognized losses,” Goldman Sachs said.

Spain, fighting to rein in the euro-region’s third-largest budget deficit, is trying to shield public finances from the cost of cleaning up the banks. While the state created the FROB rescue fund in 2009, which has bought preference shares and ordinary shares in struggling lenders, it ruled last year that any losses from the restructuring would be borne by the industry-financed Deposit Guarantee Fund.

To contact the editor responsible for this story: Emma Ross-Thomas at

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