MADRID, Oct 18 (Reuters) - Higher bad debt levels, slowing business and increased financing costs could hurt Spanish bank income and will lead to restructuring in the sector, bank leaders said in a television programme broadcast on Saturday.
Debt defaults will rise from current rates and credit growth will not return to past levels, Bank of Spain Governor Miguel Angel Fernandez Ordonez told Spanish Television (TVE).
'The banks need to take heed of all this because it could affect their income statements,' Fernandez Ordonez told TVE's Weekly Report programme which spoke to bank leaders about the health of the Spanish financial system.
Spain's tightly regulated banks have weathered the credit crisis better than those in many other countries after avoiding U.S. subprime assets and building up high provision levels.
They face the risk of soaring debt defaults after the collapse of a decade-long house building and property boom.
Leading banks Santander and BBVA diversified out of domestic property years ago and are expected to take advantage of knock-down asset values to buy up firms.
Smaller institutions and savings banks have higher real estate exposure and greater liquidity problems which have raised expectations of mergers in the mid-term.
'We have the opportunity to come out of this in a better position, and clearly, the financial system will have a restructuring,' BBVA chief Francisco Gonzalez told TVE.
He said bank supervision would have to be improved.
'We haven't had adequate regulation, there was a feeling the market could do anything, and it's not like that,' he said.
Santander Chairman Emilio Botin said Spaniards need not worry about their savings and banks knew what they had to do to shield themselves from risks.
'There are no secrets in banking, what the banks have to do is what they've always done, that is provide credit, take deposits, know their clients very well and be very prudent in terms of risk,' Botin said.
Spain's bad debt rate has tripled in the past year to 2.5 percent of outstanding loans in August, marking the highest rate since 1998, but still a relatively low level for Europe.
Some analysts see that rising over 6 percent in 2009 when the International Monetary Fund forecasts Spanish GDP will shrink 0.2 percent, marking Spain's first recession since 1993.
Banco Popular Chairman Angel Ron said the international financial crisis would hurt economic growth.
'Growth will have to be much more in line with the capacity we have to finance it,' Ron told TVE.
Spanish Prime Minister Jose Luis Rodriguez Zapatero has offered to buy up to 50 billion euros ($67.35 billion) of bank assets, and guarantee at least 200 billion euros in bank debt issues, to boost liquidity and jump-start lending to firms and households.
Fernandez Ordonez has repeatedly told banks to cut costs.
'They face a challenge from bad debt, a greater increase in bad debt,' Fernandez Ordonez told TVE. 'The challenge of less business, because obviously we're not going to return to (past) credit growth levels, and the challenge of higher financing costs.'
(Reporting by Jesus Aguado; Writing by Andrew Hay; Editing by Richard Williams) ($1=.7424 Euros) Keywords: FINANCIAL/SPAIN ORDONEZ tf.TFN-Europe_newsdesk@thomson.com ak COPYRIGHT Copyright Thomson Financial News Limited 2008. All rights reserved. The copying, republication or redistribution of Thomson Financial News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Financial News.
Debt defaults will rise from current rates and credit growth will not return to past levels, Bank of Spain Governor Miguel Angel Fernandez Ordonez told Spanish Television (TVE).
'The banks need to take heed of all this because it could affect their income statements,' Fernandez Ordonez told TVE's Weekly Report programme which spoke to bank leaders about the health of the Spanish financial system.
Spain's tightly regulated banks have weathered the credit crisis better than those in many other countries after avoiding U.S. subprime assets and building up high provision levels.
They face the risk of soaring debt defaults after the collapse of a decade-long house building and property boom.
Leading banks Santander and BBVA diversified out of domestic property years ago and are expected to take advantage of knock-down asset values to buy up firms.
Smaller institutions and savings banks have higher real estate exposure and greater liquidity problems which have raised expectations of mergers in the mid-term.
'We have the opportunity to come out of this in a better position, and clearly, the financial system will have a restructuring,' BBVA chief Francisco Gonzalez told TVE.
He said bank supervision would have to be improved.
'We haven't had adequate regulation, there was a feeling the market could do anything, and it's not like that,' he said.
Santander Chairman Emilio Botin said Spaniards need not worry about their savings and banks knew what they had to do to shield themselves from risks.
'There are no secrets in banking, what the banks have to do is what they've always done, that is provide credit, take deposits, know their clients very well and be very prudent in terms of risk,' Botin said.
Spain's bad debt rate has tripled in the past year to 2.5 percent of outstanding loans in August, marking the highest rate since 1998, but still a relatively low level for Europe.
Some analysts see that rising over 6 percent in 2009 when the International Monetary Fund forecasts Spanish GDP will shrink 0.2 percent, marking Spain's first recession since 1993.
Banco Popular Chairman Angel Ron said the international financial crisis would hurt economic growth.
'Growth will have to be much more in line with the capacity we have to finance it,' Ron told TVE.
Spanish Prime Minister Jose Luis Rodriguez Zapatero has offered to buy up to 50 billion euros ($67.35 billion) of bank assets, and guarantee at least 200 billion euros in bank debt issues, to boost liquidity and jump-start lending to firms and households.
Fernandez Ordonez has repeatedly told banks to cut costs.
'They face a challenge from bad debt, a greater increase in bad debt,' Fernandez Ordonez told TVE. 'The challenge of less business, because obviously we're not going to return to (past) credit growth levels, and the challenge of higher financing costs.'
(Reporting by Jesus Aguado; Writing by Andrew Hay; Editing by Richard Williams) ($1=.7424 Euros) Keywords: FINANCIAL/SPAIN ORDONEZ tf.TFN-Europe_newsdesk@thomson.com ak COPYRIGHT Copyright Thomson Financial News Limited 2008. All rights reserved. The copying, republication or redistribution of Thomson Financial News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Financial News.