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IMF's Rice Says Spain Banks Should Clear Balance Sheets

May 3 (Bloomberg) -- Spanish banks should clear as much as they can off their balance sheets as the government decides how to best address vulnerabilities in the country’s financial industry, an International Monetary Fund spokesman said.

Asked whether Spanish banks should spin off their “bad assets” into a separate company, IMF spokesman Gerry Rice said that it is first “critical to do the due diligence of these banks’ assets before taking a final decision.”

“In the meantime banks should be urged to clear as much as possible off their balance sheets,” Rice said at a press briefing in Washington.

The IMF said last week Spain may need to use more public money to shore up its banks, and raised the possibility of lenders offloading toxic assets into separate vehicles.

An IMF mission will go to Greece, where the fund co-finances a bailout package, once a new government is formed after the May 6 elections, Rice said.

Asked about the prospects for a loan to Hungary, Rice said the IMF welcomed “the recent progress in Hungary’s discussions with the European Commission, and we’re ready to start negotiations as soon as adequate steps are taken to ensure central bank independence, as has been discussed with the Hungarian government.”

To contact the editor responsible for this story: Chris Wellisz at cwellisz@bloomberg.net

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