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Default rate hits new record high at end of 2013

Non-performing loan ratio rises to 13.6 percent in December

Non-performing loans in the Spanish banking sector hit a new record in December as unemployment remained unacceptably high and lending continued to contract.

According to figures released Tuesday by the Bank of Spain, the loan default rate climbed from 13.08 percent in November to 13.61 percent in the last month of 2013. The default rate in December 2012 stood at 10.44 percent.

In absolute terms, loans that have not been serviced in more than 90 days rose to 197.045 billion euros from 192.480 billion in November. Outstanding loans in December declined by 24 billion euros in December from the previous month to 1.44 trillion, the lowest levels since 2006, another factor that explains the increase in the default rate.

The figures will be those used in the stress test to which Spanish and other European banks will be submitted later this year.

The figures were released a day after the Paris-based Organization for Economic Cooperation and Development said that Spanish and other European banks will need further injections of capital to meet the new solvency requirements of the Bank for International Settlements. The OECD calculated that the 10 biggest banking systems in Europe require a further 3.650 billion euros in maximum quality capital, 524 million in the case of Spain.

The OECD also said that Europe had been slower than the United States in addressing the weaknesses of the financial sector that unleashed the global financial crisis.

Joaquín Maudos of the Valencia Institute of Economic Research (IVIE) said that the banks have until 2018 to meet the new so-called Basel requirements and that, by then, “Spain’s needs will be below those of France and Germany, whose banks are more leveraged.”