Spain's banks boosted borrowing from the European Central Bank to a new record in April, as they took advantage of emergency cheap loans.
Borrowing surged to €263.5 billion from €227.6 billion in March and the fourth consecutive monthly record, Bank of Spain figures showed.
The ECB pumped over €1 trillion in cheap loans into the banking system in December and February, seeking to avert a dangerous credit squeeze.
Meanwhile, Spain's borrowing costs rose today in an auction of 12 and 18-month debt, central bank figures showed.
Spanish banks have found it hard to borrow money from banks in other euro zone countries because many in Spain are heavily exposed to the property sector, which has been in a slump since a bubble burst in 2008.
Spanish banks reveal new provisions
Spain's top four banks will build a new €11.3 billion cushion against bad loans, latest statements showed, but investors feared it was not enough. The extra cash meets drastic new rules announced on Friday.
These oblige Spanish banks to set aside an extra €30 billion in 2012 in case loans to the collapsed property sector go bad. That is on top of the €53.8 billion the banks were told to set aside to comply with reforms enacted in February.
Under the new reform, Madrid also charged two auditing firms with valuing banks' exposure to the property sector, and said it would force banks to shift seized property assets from their balance sheets and place them in separate agencies.
The big banks revealed the financial impact of the new rules for this year in a series of statements issued up to today:
- Santander, the biggest euro zone bank by market value, said it would set aside an additional €2.7 billion.
- BBVA, the second largest Spanish bank, said it would make an additional €1.8 billion in provisions.
- CaixaBank, the country's third largest, will provision €2.1 billion more.
- Bankia, which the government announced last week will be nationalised to salvage its balance sheet from a vast exposure to the property sector, said it would set aside €4.7 billion.
Among others, Banca Civica, which is merging with CaixaBank, will provision €1.2 billion and number-five bank Banco Popular said it would set aside a net €2.3 billion, without giving gross figures.
Investors sent banking shares into a slide despite the reform, enshrined in a royal decree that was welcomed by officials of the European Union and International Monetary Fund.
Bank of Spain figures show the commercial banks held problematic property assets, including loans and seized property, of €184 billion, 60% of their property portfolio at the end of 2011.
Credit rating agency Moody's Investors Service said in a report that the state takeover of Bankia and the extra provisions should induce banks to better protect against risk.
"But these actions still leave many banks and their creditors vulnerable to rapidly rising problem loans," it warned in a weekly report. "We view many Spanish banks as vulnerable to the current recession and ongoing real estate crisis," Moody's Investors Service added.
"We expect problem loans and loan losses to grow further, including in loan categories such as residential mortgages, loans to small and midsize enterprises and consumer finance, all of which the most recent royal decree does not cover," it added.
The Spanish government said banks will finance their own provisions, or turn to loans from the state-backed Fund for Orderly Bank Restructuring (FROB) carrying an interest rate of 10%.
Moody's said it had already estimated total recapitalisation needs for the banks at €50 billion, in addition to €15 billion already committed by the FROB. Moody's said Spain could still turn to the European rescue mechanisms to find funding for its banks - an option that the government has refused to countenance.
"However, to be a realistic option, the access conditions for a strictly banking-related programme will probably have to differ significantly from the programs extended to Greece, Ireland and Portugal, so as to ensure continued access to private capital markets for the sovereign," Moody's said.
Spain borrowing costs rise for short-term debt
Spain's borrowing costs rose today in an auction of 12 and 18-month debt, central bank figures showed, as markets fretted over the final cost of the country's banking woes.
But the Treasury still raised €2.903 billion in the debt auction, near the top of its target that ranged from €2-3 billion. At higher rates, demand for the issue was moderate, exceeding supply by slightly more than two to one.
Borrowing costs were up from the last comparable auction on April 17, rising to 2.985% from 2.623% for the 12-month notes and to 3.302% from 3.11% for the 18-month notes.
Investors worried that Spain's public debt might rise sharply if the state is forced to help clean up the balance sheets of commercial banks, many of them heavily exposed to the collapsed property sector.