Spanish banks cut again ECB loan addiction

What difference do having borrowed €850.1 billion as of February from the European Central Bank make? Small variations in the right direction, when these are constant, tell investors that improvements may be sustainable, even trustworthy. And banks in Spain are nothing but aware they must show markets that eurosceptic commentators carelessly miss the wider picture: in January, the figure was €907.4 billion.

Clearly, Spanish banks have been cutting their reliance on ECB conveniently priced funding during the last six months, even if the steps taken aren’t impressive. On monthly basis, the country’s lenders required in February over €26 billion less credit–down to €271.8 billion–than in January. Well done? The overall debt the banking system now bears to the central bank dropped -9 percentage points last month, which looks good until you check the ratios of what the total ECB loans received sum and what Spanish banks’ assets weigh among the European sector’s. Those are 29 percent against 10 percent. There still is a long way to go.

Yet, the progress is to be welcomed. The Spanish banks’ correction in February was 5.2 percentage points higher than the average in the eurozone.

Analysts in Madrid said interest in banking stock has increased among non-resident investor, private deposit levels have begun to recover and ECB help will be less needed in the second half of 2013. In January, the European Stability Mechanism fund injected €36.9 billion into four government-intervened entities–Bankia, Catalunya Banc, NCG and Banco de Valencia–and €1.3 more billion this week into Grupo 2, BMN, Liberbank and Caja3. CEISS is the only lender left out of the process until the European Commission allows its merger with Unicaja.

About the Author

Victor Jimenez
London contributor at thecorner.eu, reporting about the City and the Eurozone economies. He regularly writes for Spanish newspaper group Prensa Ibérica--some of his features include shared work with journalists of The Daily Telegraph and the BBC.

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