Spanish banks have minimal exposure to Lehman Brothers and remain healthy, but worsening global financial market conditions will have an impact on Spain's economy, the Bank of Spain said on Tuesday.
The comments follow concerns that smaller Spanish banks could be forced to seek fresh capital if the international financial crisis drags on and bankruptcies continue to soar in Spain's stricken property market.
"The direct impact of the Lehman bankruptcy for Spanish banks will be minimal, given their exposure is practically non-existent," Bank of Spain Director General of Research Studies Jose Luis Malo de Molina told Reuters.
"The Spanish banking system is facing the international crisis from a healthy position, with good levels of solvency and profitability," he said, reiterating past statements.
"However, it is necessary to recognise this episode signals an intensification of the serious international financial crisis, that also has consequences for the Spanish economy," Malo de Molina added.
Spanish banks and financial firms hold no more than 500 million euros ($709.6 million) worth of Lehman debt, according to press reports, representing a tiny chunk of around 270 billion euros in investments managed by the country's financial sector.
Spain's largest bank Santander said it had 11 million euros of direct exposure to the failed U.S. investment bank and a further 44.6 million euros through derivative operations.
The second largest bank, BBVA, has 86 million invested in Lehman through its funds, according to stock market records, out of total investments valued around 16 billion euros.
Leading Spanish savings bank Bancaja on Tuesday said its clients had invested 13 million euros in Lehman through 5 funds.
The Bank of Spain has repeatedly stressed the strength of the Spanish banking system in the light of worries over their exposure to the property sector and their level of borrowing from the European Central Bank.
Both Santander and BBVA reined in mortgage lending before the country's real estate bubble burst, and the overall system has some of the world's strictest reserve requirements and investment rules.
Malo de Molina has said, however, that the Spanish system is not immune to prolonged money market turmoil.
Analysts have expressed concern over the high exposure to Spain's property sector of medium-sized banks such as Popular and Pastor, as well as savings banks, as the economy slides towards recession.
Spain was the only one of the euro zone's four biggest economies not to contract in the second quarter after the government drew on its budget surplus to launch a 38 billion euro economic stimulus package.
But the European Commission expects the Spanish economy, fourth largest in the 15-member currency bloc, to contract in the third quarter and enter recession by year-end.
Spain's Socialist government hopes for an economic recovery in the second half of 2009. Analysts say it could take longer given the country's high dependence on house-building and real estate sales to drive growth.
(Reporting by Andrew Hay; Editing by Jason Webb, Stephen Nisbet, John Stonestreet)
Source:
Reuters