The national flag flies over the Spanish parliament in Madrid.
Credit: Denis Doyle

Independent auditors said Spanish banks could need up to 62 billion euros ($78 billion) in additional funding to absorb losses on bad loans.

According to the Associated Press, the results of the audits by consultants Roland Berger and Oliver Wyman were to be handed to euro zone leaders meeting in Luxembourg today as part of Spain’s formal request for aid, which was approved by Brussels two weeks ago.

Euro zone finance ministers have agreed to lend Spain up to 100 billion euros to prop up its banking sector, which is sinking under the weight of toxic loans and assets from the collapse of the country’s property market in 2008.

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But the nuts and bolts of the deal still need to be worked out.

Investors appeared to dismiss the findings of the audits commissioned by Madrid, driving Spain’s medium-term borrowing costs to euro-era highs, Reuters reported.

Yields on five-year bonds surged to 6.07 percent, a level analysts consider to be unsustainable in the long term.

The increase in yields -- which measures the risk of default -- suggests the market believes Spain’s stricken banks will need much more than 62 billion euros.

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The Telegraph said further audit results were due in September.

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