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Bank of Spain to seek higher property provisions

Source: Reuters - Tue 23rd Feb 2010

The Bank of Spain is studying raising the minimum provisions a creditor must hold against potential losses from sliding property asset values to 30 percent, news agency Europa Press reported, citing financial sources.

The Bank of Spain declined comment on the report on Monday.

Spain's central bank raised the required cushioning level from 10 percent to 20 percent in November of the value of any property a bank had on its books for more than a year. Analysts are concerned the country's banks have been keeping a lid on potential losses by valuing the homes on their books at pre-crisis levels while real property prices are down more than 14 percent from their high in 2007 and are seen sliding further.

Spain's second-largest bank BBVA shocked investors at the end of January when it reported higher than expected provisions in its full-year results, raising broader doubts about the ability of Spanish banks to absorb the property market crash.

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