Spanish banks wisely shunned the toxic financial instruments that crippled several of their international peers. And they can meet their wholesale funding needs with the help of €150bn ($191bn) in emergency Spanish government guarantees and asset purchases.
But Spain’s banks and cajas (the unlisted savings banks) cannot avoid the impact of their domestic property crash.
They are exposed not only to mortgaged homebuyers but also to thousands of struggling property developers and construction companies.
As developer after indebted developer collapses and hands over devalued property projects to creditors, the issue of bad real estate debts has emerged as the biggest threat to the health of the Spanish banking system, according to senior bankers and regulators.
