Spanish Banks Set Aside Billions For Toxic Assets

Published February 7, 2012 9:00PM (EST)

MADRID (AP) — Spain's three top banks said Tuesday they will set aside an additional euro6.1 billion ($8 billion) to meet a new government demand for all banks to boost their buffers against troubled real estate assets.

Banco Santander, Europe's biggest bank by market capitalization, said it would make allowance for an extra euro2.3 billion ($3 billion) buffer to meet the government requirement. It said the amount will be partially covered through anticipated capital gains, including euro900 million ($1.2 billion) from the sale of Banco Santander Colombia.

Banco Santander SA said in a statement the new reserve comes on top of euro1.8 billion ($2.4 billion) charged against the bank's 2011 financial results.

Spain last week ordered banks to raise euro50 billion ($65.6 billion) to protect themselves against troubled real estate assets from a domestic construction boom that went bust.

The country's second bank, Banco Bilbao Vizcaya Argentaria SA, said it would be setting aside euro1.4 billion ($1.8 billion) to boost its cover of toxic assets. BBVA said it would be able to absorb the total sum in 2012 thanks to its strong results.

CaixaBank SA, Spain's No. 3 bank, will designate euro2.4 billion ($3.2 billion) in additional reserves.

Spanish banks have about euro175 billion ($229.5 billion) in troubled holdings. The bank reform require institutions to increase provisions for troubled assets from 30 percent to up to 80 percent of book value, creating the incentive for them to sell them off.

By Salon Staff

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