IMF gives Spain warning over economic future

PALMA
THE International Monetary Fund (IMF) has said today that Spanish banks will need 22 billion euros to cover the loss of value of assets if the crisis worsens, and predicts that bad debt will continue to rise.

In a study conducted in collaboration with the Bank of Spain, the IMF predicted that non-performing loans and the recovery of property for nonpayment will continue to rise, which will weigh heavily on the balance sheets.

According to the IMF, savings banks are especially vulnerable, and it called for a comprehensive restructuring of the sector before June, when the Banking Ordinance Restructuring Fund (BORF) is scheduled to expire. Since the fall in house prices and the recession have been more dramatic in Spain than in the rest of the Euro zone countries, some analysts have questioned whether the financial sector has been left with sufficient reserves to withstand the blow, despite the fact that Spanish banks entered the crisis with higher reserves than in other countries.