Spanish banks' bad debts as a percentage of total loans fell to 12.5 percent in December as a result of a dip in overall lending and bad loans, according to data published on Wednesday by the Bank of Spain.

Spanish banks' bad loan ratio fell from 12.7 percent in November to 12.5 percent in December, with bad loans falling by 3.903 billion euros (about 4.442 billion U.S. dollars) to a total of 172.603 billion euros in the last month of 2014.

From November to December, overall lending fell by 6.356 billion euros, the Bank of Spain said.

Spanish banks' bad loan ratio has been falling for four consecutive months. It had risen in July and August, 2014 but began falling in subsequent months.

Spanish banks' non-performing loan ratio began to climb due to the financial crisis caused by the burst of the housing bubble in 2008 and many families struggled to pay their debts as the economic recession hit Spain.

As a result, the Spanish government created the Spanish 'bad bank,' called SAREB, which helped reduce toxic assets within the Spanish banking system in the period of December 2012 and February 2013, leading to a fall in Spanish banks' bad loan ratio. Endit

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