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Moody's warns of bad loans risk

BANKS in Ireland, as well as those in Spain, Italy and Britain, need to set aside much more money to cover potentially bad loans, credit-ratings agency Moody's has warned.

EUROPEAN banks have already raised hundreds of billions of euro to cover possible losses from loans that soured in property and financial market crises.

Much of the funding has come from governments.

"We believe that many banks, in particular in Spain, Italy, Ireland, and the UK, require material amounts of additional provisions to fully clean up their balance sheets," Moody's said in its global banking outlook for 2013.

"Some banks have in recent years delayed full recognition of embedded loan losses, partly by restructuring loans," the report added. "This strategy of buying time limits a bank's capacity for new lending and poses risks for creditors of European banks,'' it said. The agency did not say how much extra money banks would need.