Spanish banks' bad debts could soar as high as €260 billion ($332 billion) in the near future as the country's economic crisis shows no sign of abating.
This morning (22 May), the Institute of International Finance (IIF) released a new report in which it indicated that financiers in the Iberian nation are set to experience a tough time in the near future.
As well as having to deal with a larger amount of bad loans, lenders could require an extra €76 billion in liquidity just to cover their loan losses as the debt issues of both the sovereign and the banking industry continue to grow.
Last week, Moody's Investor Service downgraded a group of 16 Spanish banks, including the country's largest two financiers Banco Santander and Banco Bilbao Vizcaya Argentaria.
And the IIF has now added to the feeling of negativity surrounding the sector and stated: "Spain's macroeconomic prospects are worse than those faced by Ireland, especially as regards growth and unemployment."
By Claire Archer