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Spain’s Bailed Out Banks May Separate Toxic Assets, Guindos Says

June 26, 2012

Spanish banks receiving international bailout funds may have to separate toxic assets from their balance sheets in a proposal being debated with European authorities, Economy Minister Luis de Guindos said.

The European Commission has shown a “clear preference” for segregating problematic assets and the procedure has “advantages,” de Guindos said today in Parliament. The topic is being negotiated as part of the conditions that lenders receiving aid, and the industry overall, will have to meet.

Spain’s government had repeatedly ruled out creating a so- called bad bank as Ireland did to lift soured assets off banks’ books. A Spanish decree passed in May told banks to move problematic real-estate assets into separate management companies while allowing them to keep the assets on their books.

Spain agreed on June 9 to take the rescue loan of as much as 100 billion euros ($125 billion) to help recapitalize lenders reeling from a real-estate collapse now in its fifth year. The nation’s banks may need 62 billion euros to withstand a worst- case economic scenario, according to the results of stress tests by two international consultants last week.

De Guindos said the 100 billion-euro ceiling included an “enormous margin” beyond what lenders would need. The exact recapitalization needs will be clear after an audit set to be published on July 31, he said. Most of the bailout will be used for lenders already under state control, and those banks will be recapitalized “very quickly,” de Guindos said.

To contact the reporter on this story: Emma Ross-Thomas in Madrid at

To contact the editor responsible for this story: Craig Stirling at

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