Via translation, El Economista reports the Bank of Spain Discovers €20.50 Billion Hidden Delinquencies. Emphasis on the word “discovers” not added.

Non-performing loans of Spanish banks to the end of September totaled €92.224 billion euros, 29% more than the €71.660 billion according to preliminary data included in the last Bulletin Financial Bank of Spain.

The Bank of Spain urged banks to review loan portfolios before the September 30 deadline
. [Mish note: Once again, emphasis is not added, this time in bold]

The document published today reveals that all segments of activity shows the same pattern as before. In general, institutions have shown a high recognition of credit risk deterioration.

Late payments in June rose to 11.9%, from 10% the previous year, and thereafter continued to rise, reaching 12% in August.

The same report notes that Spanish banks have a loss absorption capacity that exceeds €28.600 billion expected in the worst case scenario described by the Bank of Spain until 2015.

Bank of Spain Warns Against “Destabilizing Effects” Bail-In

Given that “hidden” losses were much greater than expected (except of course in this corner), it should not be surprising to see this headline: Bank of  Spain Warns Preemptive Rescue of Banks May Have “Destabilizing Effects”

Once again via translation from El Economista.

The governor of the Bank of Spain, Luis Maria Linde, warned today about the destabilization that may involve too hasty implementation of a preemptive “bail-in” rescue of nonviable financial institutions.

Linde believes that too much advance application of acquittals to senior debt can have “potentially destabilizing” effects.

Bank of Spain Translated

“Banks lied. No, strike that. We mean to say conditions unexpectedly deteriorated. And who couldda possibly thunk that? Smelly stuff happens. Don’t worry, we will preemptively sniff deeper next time, and with a bigger nose. We promise! But the safe thing to do now (as always) is protect senior bondholders. Rest assured, there will be no bail-ins until we are 100% certain senior bondholders don’t need to be bailed in.”

Mike “Mish” Shedlock