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Stress tests may uncover €50 billion shortfall

Source: El Confidencial. - Mon 27th Jun 2011

Stress tests on the country's financial institution, due to commence in a few weeks, look likely to result in further failures under revised guidelines, according to National Spanish newspaper, El Confidencial.

The paper suggests that banks may be glossing over up to €50 billion held in bad debts.

Spain's central bank had initially hoped that the new stress test rules, which pay greater attention to exposure to the bank's bad debt through real estate holdings, would be more lenient. The Spanish Banks and Cajas will now have to disclose much larger exposures to mortgage debt.

Once the test results are published it is almost certain that more instituations will fail due to such debts being exposed, however, it at least means that the market will take the tests more seriously, given that they have gone much further than the previous tests did.

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