"Exposure to the construction and property development sectorsimplies a significant risk for the Spanish banking system," thecentral bank said in a report. Spanish banks have taken increasingnumbers of properties onto books due to debtor awards, payments inkind and purchases and these amounted to $80 billion at the end ofDecember. The BoS said this activity is a habitual tool whendealing with loans related to construction and real estatedevelopment because guarantees comprise physical assets. The bankalso recognized that the figure could increase.

The bank calculated total potentially problematic exposure inreal estate by adding assets more than 90 days in arrears. Alsoadded in were substandard loans with weaknesses which coulddegenerate into debts, awarded properties, purchases of assets andincontrovertible losses. The Spanish central bank calculates that$599 billion of credit has been granted to construction andproperty development in the nation. Excluding investment inelectricity, airport infrastructure, petroleum, roads and railwayline construction, this falls to $541 billion.