Spanish Banks Reduced ECB Fund Borrowings in November

Spanish banks reduced their borrowings from the European Central Bank in November, according to a Bank of Spain official.

The liquidity situation that Spanish lenders have to contend with is “serious” while not “dramatic,” the official, who asked not to be identified, said today without giving a figure of the borrowings. The refinancing needs of the banks, which as a whole have half of their debt coming due after 2013, are “absolutely reasonable,” he said.

Investors have fled Spanish banking shares while financing costs have jumped on concern the country, which has the third-highest budget deficit in the euro region, may follow Ireland in needing an economic rescue. Spanish lenders have about 85 billion euros ($111 billion) of debt coming due next year, according to data compiled by Bloomberg.

Spanish banks cut their reliance on ECB funding in October to 67.9 billion euros, the lowest level in 17 months. Analysts track the number to gauge the level of access banks have to other sources of financing.

In separate comments, the official said it’s too early to determine whether Bank of Spain rules would have to be tightened further on how banks must provision for real estate taken on their books during the property crash.

The regulator said in May that lenders would have to make provisions for at least 30 percent of the value should they keep the assets for more than two years. Banks have taken 70 billion euros of repossessed or foreclosed assets onto their books, part of 181 billion euros of what the Bank of Spain terms “potentially troubled exposure” to construction and real estate.

The 30 percent rule is “adequate for now,” the official said.

The restructuring of Spain’s savings banks industry is proceeding quickly enough in its first stages, the official said. The regulator is aware of the need to keep the cost to public coffers to a minimum and is “comfortable” with a process where lenders bore the cost burden of the reorganization, he said.

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