Spain Considers Letting Banks Offload Toxic Real-Estate Assets

Spain is considering allowing banks to offload real-estate assets for which they have already set aside provisions as part of measures to clean up the finance industry.

The Economy Ministry is still considering ways to let banks take the provisioned assets off their books and rules out forming a so-called bad bank funded by the taxpayer, a ministry official said, declining to be named in line with government policy.

Spain is trying to restore investor confidence in its banking system amid concern the nation’s real-estate collapse will overburden public finances. The European Union said April 19 that Spain doesn’t need to seek help in recapitalizing its banks and that it doesn’t plan to tap rescue funds.

In a presentation to analysts in London, Jose Maria Roldan, head of banking regulation at the Bank of Spain, raised the possibility of lenders separating bad assets into different vehicles once losses have been recognized and written down.

Economy Minister Luis de Guindos said in February that banks would have until the end of May to present merger plans that would give them two years instead of one to make additional provisions for real estate on their balance sheets.

Prime Minister Mariano Rajoy, in power since December, pledged a “true restructuring” of the industry at no cost to the taxpayer four years after the decade-long property boom collapsed.

In November, Rajoy asked for at least two papers from academics on how to create a bad bank, according to two people with knowledge of the matter, who declined be named because the process isn’t public.

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