MADRID—Spanish banks’ bad loans, a major source of concern to financial markets, rose in July to the highest level in 16 years at nearly seven percent, the Bank of Spain said Monday.
Bank loans whose recovery is in doubt amounted to 124.7 billion euros ($171.9 billion), or 6.94 percent of total assets, in July, the central bank said in a report – the highest ratio since February 1995.
That compares to a revised bad loan ratio in June of 6.69 percent in June. The central bank had previously said the bad loan ratio was 6.42 percent that month.
Spain’s lenders, especially its regional savings banks which account for about half of all lending in the country, have been heavily exposed to bad debt since the collapse of the property sector at the end of 2008.
The government and Bank of Spain have forced a wave of consolidation in the sector this year and are requiring banks to quickly increase the proportion of core capital they hold to above international norms.