The pace of granting credit slows down according to the Bank of Spain


The Bank of Spain has observed a less dynamism in the flow of new financing to households and companies during the second part of the year as a result of the tightening of financing conditions, according to an article published this Friday entitled ‘Recent evolution of financing and bank credit to the non-financial private sector. Second semester of 2022’.

This paper aims to analyze the conditions and volume of financing received by households and companies and to quantify the risk assumed by deposit institutions through loans to these two sectors.

In a context of interest rate hikes by the European Central Bank (ECB)the Bank of Spain indicates that the cost of financing the private sector has continued to rise During the last months. Specifically, the cost of business financing through the issuance of long-term fixed-income securities has risen by slightly more than 50 basis points between June and December 2022, and has stood at 4.4%.

Too a increased the interest rate of the new bank credit for the purchase of housingin this case, 95 basis points between June and November (latest data available), and that of consumer credit has done so by around 65 basis points, while the increase in the cost of the new bank financing granted to productive activities It has been more intense: between 120 basis points in loans to individual entrepreneurs and 155 basis points in new credit operations granted to non-financial corporations for an amount exceeding one million euros.

Added to this tightening of financing conditions is the perception, on the part of the banking sector, of a decline in demand for credit by households and companies, in such a way that in recent months, the Bank of Spain has observed a moderation in the volumes of new financing received by households and companies in most segments, in terms of accumulated seasonally adjusted flows of three months.

So, the volume of the new credit operations granted to households for home purchase shows a certain decline, which has intensified since October. The amount of new loans granted to families for purposes other than home purchase and consumption has also fallen. In contrast, the flow of new bank credit for consumption has continued to increase in recent months, although in November it was still 13% below pre-Covid-19 crisis levels.

According to the new bank financing for productive activitiesthe Bank of Spain points out that it also fell across the board during the last months of last year, according to the information available up to November.

However, it highlights that the fund accounting in the capital markets through the issuance of fixed income between June and November 2022 stood at high levels, an evolution that has been conditioned by the “bulky volume” of short-term issuances.


The Bank of Spain also states that the Outstanding balance of credit to the resident private sector in Spain it stood at 1,172 million euros in September 2022, after falling by 0.9% in quarter-on-quarter terms.

However, this decline was “significantly less” than the typical mean contraction which is usually observed in the third quarter of the year, both in the years prior to the pandemic, with an average drop of 1.6% in the period 2014-2019, and in those immediately after the start of the pandemic, with an average drop of 1.6% also in 2020-2021, a situation that is mainly due tol Behavior of the stock of credit for business activities.

Thus, nominal year-on-year growth recovered a positive value, increasing by 0.6%, compared to the year-on-year decrease of 0.1% in June 2022. However, the supervisor affirms that the data available for the fourth quarter of 2022 anticipate a correction of this expansion.


The article also analyzes the evolution of doubtful credits (stage 3) and in special surveillance (2). Doubtful loans continued to fall and stood at 43.4 billion euros in September, after falling 3.5% in the third quarter of the year and 13.2% cumulatively in the last 12 months. In addition, since December 2019, doubtful loans accumulate a decrease of 20%.

For his part, loans under special surveillance decreased by 3.3% in the third quarter of 2022, accumulating a year-on-year decrease of 13.1%, reaching 81,900 million euros.

Despite this correction, the Bank of Spain points out that the volume of credit under special surveillance is still 22.9% higher than before the pandemic, for which reason the supervisor indicates that “latent risks persist” for credit qualitydespite the good performance of doubtful loans as a whole.

Likewise, refinanced or restructured loans, which are also often identified with a higher risk -50.2% of them were classified as doubtful in September 2022-, descended also in the third quarter of 2022, 3.6% to 52,600 million euros, which represents a year-on-year decrease of 12.4%.

“These loans grew significantly during 2021, due to the consequences of the health crisis, but they have been reduced, reaching 7.3% below the figure observed in December 2019 in September 2022,” indicates the supervisor.


The Bank of Spain has observed the higher relative deterioration in loans granted with ICO guarantee, whose doubtful ratio was close to 6% in September 2022, compared to levels of this ratio of 3.5% and 0.5% in December 2021 and 2020. In addition, 21.2% of these loans with ICO guarantee are classified as under special surveillance in September 2022, 0.9 percentage points more than in December 2021.

The article indicates that the end of most of the deficiencies of the ICO loans during the second quarter of 2022 could further increase its problematic asset ratios in the futurealthough there would still be no evidence to date of this negative effect.

The most affected sectors, such as hotels and restaurants or transport, continued to present a higher proportion of problematic assets in September 2022, although they also showed a downward trend like the rest of the sectors.

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