Spain sees €50bn of new bank provisions Spain says it expects its banks to set aside up to €50bn in further provisions on their bad property assets as part of a new round of reforms for the country's financial sector. Luis de Guindos, economy minister in the centre-right government that took office two weeks ago after defeating the Socialists, said on Wednesday it was essential that the banks clean up their balance sheets without imposing a burden on the treasury. The €50bn figure, equivalent to about 4 per cent of Spain's GDP, is higher than private expectations by bankers. Some analysts had speculated that the Popular party government of Mariano Rajoy, prime minister, would set up a large, state-funded "bad bank" like Ireland's Nama to absorb the non-performing assets of lenders hit by the collapse of the housing bubble in 2007 and the subsequent European economic crisis. However, strong Spanish banks such as Santander and BBVA opposed the "bad bank" idea, arguing that they could handle their own problems and that weaker lenders should if necessary be absorbed by their stronger rivals. That is the path now being taken by the government with Mr de Guindos saying there should be another round of consolidation among cajas, or savings banks. "If you take international valuations as in the case of Ireland, at the most you are talking about the need for €50bn of extra provisions [by banks in Spain]," he said. In the great majority of cases, they can provide it themselves from their profits ... and it could be done not in one year but over several years. Of the €338bn of property-related assets in the Spanish financial system, about €176bn are bad loans, substandard loans or repossessed properties and land, according to the Bank of Spain. The banks have already covered a third of these bad assets with provisions. They were expecting to be told by the government and the Bank of Spain to set aside a further 20 per cent. An extra €50bn - more than 28 per cent - would be more of a stretch, especially when they are simultaneously trying to increase capital ratios to meet European regulatory demands. Mr de Guindos said: "We have a property problem in Spain, but it's manageable ... This €50bn is about 4 per cent of Spanish GDP. This is not Ireland. It's a completely different order of magnitude. Ireland's budget deficit ballooned when it bailed out its banks, and the country itself had to be rescued by the European Union and the International Monetary Fund. Spain has already bailed out or nationalised seven lenders, spending over €21bn in state aid, some of it repayable, and deposit guarantee funds. Mr de Guindos, former head of Lehman Brothers for Spain and Portugal until the investment bank collapsed in 2008, outlined other reforms that Spain will implement while also imposing new austerity measures. They include strict new budgetary controls on the country's 17 autonomous regions, which are blamed for contributing to Spain's €22bn overshooting of its 2011 deficit target, and labour reforms that will give companies more power to set their own wages outside collective bargaining agreements for entire industrial sectors. On Thursday, the cabinet is expected to announce plans to restructure the central government administration and rationalise state companies. A new round of cuts is due in March when the 2012 budget is unveiled.