SPANISH BANKS: Doubts…

“Spanish banks are failing to recognize the true scale of their losses during the deep slump in Europe’s fifth-largest economy — something that could hamstring the sector’s growth for years” said  Moody’s Investors Service.

In a report, the credit-rating firm said Spanish financial institutions weren’t setting aside enough capital to cover surging bad loans. Moody’s said the banks set aside less than half the €108 billion ($160 billion) in loan losses it estimates they will suffer during the course of the downturn. At the current rate they are provisioning, it would take Spanish banks five years to fully cover those losses, it said.

“We remain concerned that many banks appear to be avoiding recognizing the true scale of the asset quality deterioration in their books, which could result in the banking sector remaining weak unless this is addressed more decisively,” said María Cabanyes, lead Spanish banking analyst at Moody’s.

From the Spanish  side an official representing the savings banks dismissed the notion that they were hiding losses as an “urban myth.” The official said, “We have no reason to doubt the figures the banks are giving us.” says WSJ today…

Very soon we will have the answer…