Spanish govt asks banks to conduct independent audit

The Spanish government has ordered the country's banks to conduct an independent audit of assets held by the entire banking sector and a fire sale of repossessed land and homes.

The banks were also told to set aside a further €30 billion in provisions against potentially bad property assets.

The government said it was determined to take the necessary measures to restore credibility and trust to the financial system.

''This reform will bring credibility and build confidence in the financial sector, increase credit flow in our country and lead to home sales at reasonable prices,'' said deputy prime minister Soraya Saenz de Santamaria.

Two independent valuers will conduct separate audits to value Spanish bank assets over the next four months. Banks must also hive off their burgeoning stock of repossessed land and property into separately run companies for the fire sale.

The Spanish finance minister Luis de Guindos expected banks to ask for up to €15 billion in extra financing from the country's restructuring fund to cover the provisions.
The €30 billion is, however, below the level many analysts consider is needed by Spanish banks.