Spanish banks rack up 94Bn in loans at high risk of non-payment

According to new information released last Thursday by the Bank Of Spain, Spanish Banks have racked up 94Bn in loans.

The global pandemic caused by Covid-19 had a huge effect on the World’s economy, with Spanish banks being no exception.The prolongation of the crisis is causing Spanish financial institutions to accumulate loans and other problems on their balance sheets, as reported by El Periodico.

At the end of December, Spanish banks had 94Bn euros under special surveillance in Spain due to their high risk of default, which is equivalent to 8.1% of the financing they had granted to companies and households and represents a growth of 1% since June and 14% in twelve months, as revealed on Thursday by the Bank of Spain. 

Of this amount, 61,046 million corresponded to companies (12.4% of this portfolio and 25.7% more than at the end of 2020), another 31,408 million were granted to households (5.1% of the total and, in this case, 1.7% less than in December 2020) and the rest were loans to non-banking financial companies. To put this into perspective, these loans under special surveillance represent a notably higher volume than those already in default: 49 billion, 4.2% of total loans, of which 27 billion corresponded to companies (with a default rate of 5.3%) and 22 billion to households (3.7% of defaults).

As for loans to companies with public guarantees from the ICO (Spanish Official Credit Institute) granted in 2020 due to the pandemic, 17.9 billion are under special surveillance, 20.2% of the total, and 3 billion are in default, 3.5%. In any case, 30% of the loans in this portfolio were granted under the moratorium on repayment of the principal due between April and September, so the figures are expected to worsen. “The recommendation to banks is that they be extremely prudent and not to release the extraordinary provisions made in 2020 due to the pandemic,” stated the supervisor’s director of financial stability, Ángel Estrada, during the presentation of his department’s biannual report on Wednesday.

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