MADRID (AFP) ― The International Monetary Fund on Wednesday urged Spain to push further ahead with banking reforms aimed at stabilizing its troubled financial sector.
IMF inspectors concluded Spain needs “to continue with and further deepen the financial sector reform strategy to address remaining vulnerabilities and build strong capital buffers in the sector,” it said in a report.
The conservative government that came to power in December has continued a clean-up of the banking sector prompted by the 2008 financial crisis, forcing banks to increase the amount of funds they have to cushion them in case of problems.
The IMF acknowledged Spain’s efforts but warned it needs to urgently clean up some banks that are still financially weak.
“The largest banks appear sufficiently capitalized and have strong profitability to withstand a further deterioration of economic conditions,” the IMF said.
But it warned that “a group of ten banks, most of which have received state support ... were identified as being vulnerable”.
“To preserve financial stability, it is critical that these banks, especially the largest one, take swift and decisive measures to strengthen their balance sheets and improve management and governance practices,” the Washington-based fund said.
The IMF seemed to be referring to Bankia, Spain’s largest savings bank by assets and thought to be dangerously exposed to the country’s disastrous real estate sector.
Spanish banks are a key concern on financial markets because of the declining value of the huge loans they allowed to build up during a property bubble that collapsed in 2008.
In February, the ratio of bad loans at Spanish banks shot to an 18-year high as the banks struggled with a mass of deteriorating property-related loans.
The Bank of Spain said doubtful loans in February amounted to 143.8 billion euros ($188 billion), rising to 8.15 percent of total credits ― the highest ratio since 1994.
