Moody's: Spain Banks Evade Loan Facts

Spanish banks are failing to recognize the true scale of their losses amid a deep slump in Europe's fifth-largest economy, something that could hamstring the sector's growth for years, Moody's Investors Service said Tuesday in a report.

Moody's predicted Spanish bank customers will default on about 108 billion euros of loans during the economic downturn. Loan-loss provisions cover less than half these losses, meaning lenders would have to retain a big chunk of profits and raise more capital.

Moody's voiced concern that banks are delaying the recognition of nonperforming loans by either restructuring debt agreements or resorting to voluntary agreements under which a lender accepts the property as payment in kind and releases the debtor from his obligations.

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