Spain unveils major financial reforms

May 12, 2012

Spain unveils major financial reforms

The government in Spain has announced a new set of financial reforms, particularly aimed at cleaning up the country’s banking system, which is saddled with bad loans.

It approved measures forcing banks to set aside a new 30bn euro ($39bn) financial cushion on top of 54bn euros ordered in February as insurance against bad loans on property.

The new rules also require banks to separate property assets from their balance sheets.

The government of Mariano Rajoy took the sweeping action just two days after it effectively took over the fourth-biggest bank, Bankia, to salvage its balance sheet, bulging with losses.

The government also ordered an independent audit on loans and property assets across the entire banking sector, as the European Union had asked.

Luis de Guindos, Spain’s economy minister, said: “The government wants complete transparency, clarity is crucial to end any doubt about Spain’s solvency.”

Banks have until the end of the year to move their property holdings into asset-management firms for a fire-sale, Guindos said.

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