Spanish banks report fall in bad loans in February

The burden of bad loans held by Spanish banks eased in February as a "bad bank" absorbed risky assets, the Bank of Spain said Thursday. The ratio of defaults as a proportion of total lending dropped to 10.39 percent in February from 10.78 percent in the previous month, the central bank said. Overall, 161.87 billion euros ($211.3 billion) in loans were termed "non-performing" in February, down from 170.69 billion euros in January. In February, four Spanish banks, Liberbank, Caja3, BancoMareNostrum et CEISS, transferred risky assets to Spain's bad bank, a financial entity created to help clear bad loans from the country's shaky financial system, which led to the drop in the bad loan ratio, the central bank said. Spain is shoring up its banks after they were hammered by a property market crash in 2008, using a European Union rescue loan obtained last year of up to 100 billion euros. As one of the conditions imposed in return for the European credit, Madrid agreed to create a bad bank known by the acronym SAREB to absorb impaired assets from troubled banks. Four of the hardest hit banks that were taken over by the state last year, Bankia, Catalunya Caixa, NovaCaixaGalicia and Banco de Valencia, transferred bad loans to SAREB in December, the month it began operating. SAREB is expected to absorb tens of billions of euros in bad loans and other troubled assets that have been weighing on the balance sheets of Spanish banks since the property market crashed. It will then seek to sell those discounted assets at a profit.