Spanish savings banks have begun selling off the large property portfolios they acquired as collateral from loan defaults in an effort to improve solvency ratios, a move which risks further falls in property values that could impair the value of their asset books.

As lenders have assumed the collateral on defaulted loans, local financial institutions have collected $12.2 billion of properties over the past 12 months. So far the banks have held on to the majority of their property portfolios. The banks saw building property portfolios as a holding operation until an economic recovery allowed for the disposal of such assets at acceptable prices — a strategy adopted successfully during a recession in the early 1990s.

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