The ratio of bad loans at Spanish banks rose in August to 13.25 percent, the Bank of Spain said yesterday, a worrying sign as the ECB put the final touches on its bank assets review, or stress tests.
The volume of bad loans, primarily a legacy of the country’s real estate boom that went bust, actually dipped slightly to 184.3 billion euros, but the ratio rose as Spanish lenders cut back on lending.
The ratio is still below the record 13.6 percent it set last December.
Markets took fright this week at the potentially disastrous combination of recession and deflation taking root in the eurozone, sending the yield on bonds of periphery countries including Spain sharply higher.

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