Spanish Banks’ Record ECB Loans Undermine Creditors: Mortgages

Spain’s lenders are pledging some of their best assets to raise record levels of secured funding, including from the European Central Bank, eroding creditor safeguards at the same time the government is planning the country’s largest bank bailout.

Borrowing from the ECB rose 50 percent in March from the prior month to 227.6 billion euros ($294.3 billion). Bankia Group is among lenders that increased mortgage-backed debt issuance by 35 percent since December 2007 to 535.1 billion euros, or 53 percent of their real-estate loans, according to Spanish Mortgage Association data at the end of 2011. Rodrigo Rato, Bankia chairman, stepped down this week as part of a plan in which the government is willing to inject public funds.