2 Sep 2012

Bad bank to be set up in Spain

8:20 am on 2 September 2012

Spain is setting up a "bad bank" to take over toxic assets held by banks since the property crash three years ago.

The move is aimed at helping troubled banks to draw a line under the debt crisis and move on.

Economy minister Luis de Guindos said the Bank of Spain will assess the value of the assets being transferred into the "banco malo" and the banks will receive cash, debt or shares in return.

The BBC reports the bad bank could last 10 - 15 years.

In June, Spain requested 100 billion euros ($US122 billion) in loans from the European Financial Stability Facility bailout fund to help support the banks, which are struggling with bad debts from loans made in the property sector.

The value of bank loans at risk of not being repaid is estimated to be 156 billion euros.

Mr de Guindos also announced new rules that will allow the government to take over problem banks.

In July, Madrid announced additional spending cuts and tax rises worth 65 billion euros.