Spain to report quarterly on banks' asset sales

MADRID Nov 3 (Reuters) - Spain's government will report each quarter on which Spanish banks are forced to sell assets under its plan to ease financing problems and boost lending, Economy Secretary David Vegara said on Monday.

Spain's opposition has questioned the transparency of a government-run fund which will buy up to 50 billion euros ($64.40 billion) in mortgage-backed-debt and other bank assets over the next two years.

Vegara said the government did not want to stigmatise banks that use the fund and purchases would remain confidential before Economy Minister Pedro Solbes reported them to Spain's lower house economy commission each quarter.

"When the time comes, all the information will be available," Vegara told a press briefing on the purchase plan.

Spain says its banks do not need the kind of capital injections seen elsewhere in Europe due to minimal U.S. sub-prime exposure and high provisions to face a domestic property sector collapse.

Leading banks like Santander (SAN.MC) and BBVA (BBVA.MC) diversified out of mortgage and real estate lending years ago and are expected to take advantage of knock-down prices to buy up rivals.

Smaller institutions have higher real estate exposure and greater difficulty raising financing.

To head off a liquidity crunch, Spanish Prime Minister Jose Luis Rodriguez Zapatero has set up a fund to buy long-term debt banks cannot sell to the market or the European Central Bank.

The fund will operate two portfolios, one buying bank assets and another offering reverse repos that essentially act as bank loans, Vegara said.

The government will only buy investment-grade assets issued after Oct. 15, 2008, so as to encourage banks to issue new paper, Vegara told reporters.

Repos will be for assets issued after Aug. 1 2007, he said.

To encourage banks to boost lending, the government will allocate 25 percent of each auction to those institutions that have given the most credit, Vegara said.

The government will purchase debt with maturities of 12 months or longer.

Acquisitions start in November with a 5 billion euros reverse repo auction for 2 year mortgage-backed-debt, followed by a December purchase of 5 billion euros in 3-year mortgage-backed debt, Vegara said.

The government will pay for purchases by issuing up to 50 billion euros in additional public debt, a move that would raise its debt level by 4.5 percentage points from a current 38.2 percent of gross domestic product, the government said.

(Reporting by Andrew Hay; Editing by Hans Peters)