Bad housing loans add to Spanish woes

The centre of focus for world financial markets is firmly back on Spain after official data from the Bank of Spain showed its banks were suffering under higher than expected bad housing loans.

Spanish banks are a key concern to financial markets because of the declining value of huge loans built up during the property bubble that collapsed in 2008.

Doubtful loans in February amounted to €143.8 billion ($AU188 billion), rising to 8.15% of total credits – the highest ratio since 1994, the Bank of Spain said overnight.

Doubtful loans are when a borrower has not made a payment for more than three months.

Many analysts warned actual bad loan figures may be far worse because banks are traditionally reluctant to realise the declining value of their loans on their balance sheets.

Spanish businesses say new credit is hard to come by, according to Business Spectator.

The Bank of Spain estimated in June last year the value of Spanish banks’ doubtful loans came to about €176 billion ($AU169 billion).