Banks have already set aside provisions covering a third of these bad assets.
So far, the banks have set aside provisions for only about a third of the troubled assets they hold.
Last year, Santander set aside provisions totaling $25 billion to cover a rise in delinquent mortgages in Spain and an increase in other troubled loans across its businesses.
This week he demanded that banks write off their bad loans rather than just set aside provisions to cover potential losses.
Straggling banks have to pay more to get funding, which in turn reduces their profitability and hurts their ability to generate capital and set aside provisions.
Among proposed changes, the rules would require banks to make provisions faster, as well as set aside provisions representing 30 percent of real estate assets kept on a bank's books for more than two years.
Now it is one of the first casualties of rules set by the new government to get banks to set aside provisions and capital worth €50 billion ($66 billion) to cover losses on dud property loans.
DealBook » BBVA of Spain Reports a Drop in Profit | BBVA, the big Spanish lender, said its profit in the second quarter fell 58 percent as it set aside provisions for soured real estate assets, Bloomberg News reports.
The real worry is that local regulators will allow banks to hide losses rather than force them to set aside provisions and perhaps ask for capital from their governments.
Analysts said the cost of refunding passengers and finding alternative holidays would hit company profits, although they said Tui routinely set aside provisions for such disruption, so was less likely to face unexpected losses.
As a result: Mr. Luzon decided to set aside provisions on Santander's balance sheet for its banking and pension fund activities in Argentina to the tune of 1.3 billion euros.
