Spain's Bad Loans Hit Record High in July
Spanish banks' bad loans rose to a record high in July, continuing an upward trend, as more Spaniards default on debt in a punishing recession marked by the highest unemployment rate in the European Union.
Lenders are awaiting the first funds from a 100-billion-euro credit line from the European Union to patch up the funding gap in the country's ailing banking system, brought low by years of bad property investments during a construction boom.
Bank of Spain data showed banks' bad loans stood at 9.9 percent of their outstanding portfolios in July, the highest level on record and up from 9.4 percent a month earlier.
Loans that fell into arrears increased by 960 million euros ($1.3 billion) from June, reaching 1.7 billion euros in July.
Bad loans could rise further in coming months should an economic recovery fail to materialize, as many banks have refinanced debt owed by struggling companies to prevent them going bust.
The results of a final stress test on Spain's banks are due on Sept. 28 and will provide a basis for calculations as to which banks should receive European Union funds and how much they should receive.