BRUSSELS (Reuters) - A programme of economic and bank reform in Spain is on target, but the country's slack economy and a fall-off in lending poses a risk to the nation's banks, a review by the European Commission and the European Central Bank said on Monday.
The euro zone's fourth largest economy has drawn down 41 billion euros of a possible 100 billion euros ($135.4 billion) in euro zone assistance last year to support weak banks, hit hard by a property crash.
The European Commission and the ECB concluded their fourth review of the country's programme of reform earlier this month, saying on Monday that while Spanish banks' access to market funding had improved, risks remained.
The report said that there were signs that the economic downturn had hit its lowest point but that the weak economic situation continued to weigh on banks.
"Lending to the economy is still contracting substantially, in particular against the backdrop of weak demand," the report said, adding that the need to reduce public and private debt would further weigh on bank profits.
(Reporting by Martin Santa, Editing by John O'Donnell)