Spain's top four banks will build a new 11.3-billion-euro ($15 billion) cushion against bad loans, latest statements showed Monday, but investors feared it was not enough.
The extra cash meets drastic new rules announced Friday, obliging Spanish banks to set aside an extra 30 billion euros in 2012 in case loans to the collapsed property sector go bad.
That is on top of the 53.8 billion euros the banks were told to set aside to comply with reforms enacted in February.
Under the new reform, Madrid also charged two auditing firms with valuing banks' exposure to the property sector, and said it would force banks to shift seized property assets from their balance sheets and place them in separate agencies.
The big banks revealed the financial impact of the new rules for this year in a series of statements issued up to Monday:
-- Santander, the biggest eurozone bank by market value, said it would set aside an additional 2.7 billion euros.
-- BBVA, the second largest Spanish bank, said it would make an additional 1.8 billion euros in provisions.
-- CaixaBank, the country's third largest, will provision 2.1 billion euros more.
-- Bankia, which the government announced last week will be nationalised to salvage its balance sheet from a vast exposure to the property sector, said it would set aside 4.7 billion euros.
Among others, Banca Civica, which is merging with CaixaBank, will provision 1.2 billion euros; and number-five bank Banco Popular said it would set aside a net 2.3 billion euros, without giving gross figures.
Investors sent banking shares into a slide despite the reform, enshrined in a royal decree that was welcomed by officials of the European Union and International Monetary Fund.
After one hour of trade, Santander had slumped 3.43 percent to 4.704 euros; BBVA dropped 3.20 percent to 5.075 euros; and Caixa tumbled 1.96 percent to 2.40 euros.
Bankia plunged 4.49 euros to 1.978 euros, bringing its accumulated losses so far this month to 23.7 percent.
Bank of Spain figures show the commercial banks held problematic real estate assets, including loans and seized property, of 184 billion euros, 60 percent of their property portfolio at the end of 2011.
New York-based credit risk assessor Moody's Investors Service said in a report that the state takeover of Bankia and the extra provisions should induce banks to better protect against risk.
"But these actions still leave many banks and their creditors vulnerable to rapidly rising problem loans," it warned in a weekly report.
"We view many Spanish banks as vulnerable to the current recession and ongoing real estate crisis," Moody's Investors Service added.
"We expect problem loans and loan losses to grow further, including in loan categories such as residential mortgages, loans to small and midsize enterprises and consumer finance, all of which the most recent royal decree does not cover."
The government said banks will finance their own provisions, or turn to loans from the state-backed Fund for Orderly Bank Restructuring (FROB) carrying an interest rate of 10 percent.
Moody's said it had already estimated total recapitalisation needs for the banks at 50 billion euros, in addition to 15 billion euros already committed by the FROB.
"However, there is a risk that further provisioning and recapitalisation will be required, increasing the government's already high debt burden further," Moody's said.
It warned the general government debt ratio could rise to more than 90 percent of gross domestic product (GDP) in 2013, nearly triple the low of 36 percent in 2007.
Moody's said Spain could still turn to the European rescue mechanisms to find funding for its banks -- an option that the government has refused to countenance.
"However, to be a realistic option, the access conditions for a strictly banking-related program will probably have to differ significantly from the programs extended to Greece, Ireland and Portugal, so as to ensure continued access to private capital markets for the sovereign," Moody's said.