EC document says Spanish banks do not need new EU aid at present

EC document says Spanish banks do not need new EU aid at present.

A document prepared by the European Commission and the European Central Bank says that Spain’s banks do not at present need further European aid.

The report said that there was no reason at present to foresee further programme disbursements, according to news agency Reuters.

So far, Spanish lenders have received financial aid from Europe of €41.3 billion euros from a potential line of up to €100 billion euros.

The aid was used for the recapitalisation of state-aided banks and a capital injection into a so-called bad bank that took on bad loans and devalued property assets from the financial system.

The report, which also involved experts from the International Monitory Fund as an independent monitor, said ensuring bank profitability represents a major challenge given low interest rates and rising bad debts.

It said that a prolongation of the negative trends in unemployment, real incomes and solvency of companies beyond current expectations would increase risks particularly for weaker banks.

Concern was expressed in the document on the stability of the Spanish financial sector, which may still be impaired by uncertainty over burden sharing, as well as to what extent losses can be passed on to investors in the banks.

There is also further uncertainty over arbitration processes by which some investors will seek to prove they were missold complex hybrid investments in the banks, the document said.

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