January 27, 2009 / 9:19 AM / 9 years ago

Spain banks call on govt to buy toxic assets -paper

MADRID, Jan 27 (Reuters) - Spanish banks have asked the government to set up a fund to buy the sector's distressed property assets, El Economista said on Tuesday, citing financial sources.

The banks, due to meet the government this week, want additional support to maintain their solvency ratios as bad loans soar due to the steep property sector downturn, the paper said.

No-one was immediately available at the Spanish banking sector association for comment.

Spanish banks are facing rising defaults over debt held by property developers, which is forcing them to increase their loan loss provisions and putting pressure on their capital ratios.

While their European peers have required government bailouts over the last few months, Spanish banks have benefited from Bank of Spain regulation implemented after the Spain's last economic crisis which obliged them to build up a cushion of provisions.

But this cushion is being eroded by the rise in property-related bad debtsd.

The Spanish government has already implemented measures to increase liquidity, including pledging to buy up to 50 billion euros ($65.72 billion) in bank assets and to guarantee about 200 billion euros in bank debt issuance.

The government has also not ruled out the possibility of recapitalising the banks if necessary, according to comments by Secretary of State for the Budget Carlos Ocana in an interview in Monday's La Razon newspaper.

"Up to now it has not been necessary to recapitalise any of our banks, which is something not every country can say. But we are prepared to take any measures that are required," Ocana was quoted as saying. [ID:nLQ219814] [ID:nLR10779] [ID:nOSN001875] ($1=.7608 euros) (Reporting by Judith MacInnes; Editing by Mike Nesbit)

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