Spain's banks and cajas (the unlisted savings banks) cannot avoid the impact of their domestic property crash.

They are exposed not only to mortgaged home buyers but also to thousands of struggling property developers and construction companies.

The Bank of Spain’s inspectors at banks and cajas are anxiously studying the creditworthiness of 50,000 small, speculative developers as well as the big 15.

Spain’s residential housing bubble burst last year, paralysing homebuilders and leaving nearly 1m new houses and flats unsold. Now the malaise is spreading to commercial property and public works.

'Banks, especially savings banks, are heavily exposed to real estate developers, and we expect the inventory overhang of homes could take five years to resolve,' says David Stix, chief executive of Iberian Equities, a broker.

At the end of June, total bank credit for property developers reached a new peak of €313bn – nearly 10 times the level at the start of the decade – while loans for construction companies stood at €156bn, according to the Bank of Spain.

Financial Times