Spanish Banking System: strong liquidity position


Caixabank | Spanish banks are strongly focused on the retail segment, which provides a more stable source of funding in the long-term. Stable deposits and operational deposits (those that have proven to be harder to withdraw) account for over 60% of total deposits for nearly all Spanish banks. This has contributed both to a positive evolution of profitability in a context of rising interest rates, as well as to a favorable liquidity position and to the stability and diversification of their funding sources.

Household and non-financial corporation (NFCs) deposits peaked in August 2022. March ’23 data show a modest 2,1% decline since then, but a large part is due to the repayment of COVID-related precautionary loans and increased early-repayments in mortgages. Loan-to-deposit ratio remains stable at very comfortable levels (close to 90%).

The Spanish banking sector maintains high liquidity ratios, far above the regulatory requirements. EBA data for 4Q22 points to an LCR ratio of 171% and an NSFR of 130% for Spanish banks (versus an EU average of 165% and 126%, respectively).

Spanish banks have started to partially return TLTROs. Until the end of March ’23, the six leading banks had repaid on average 50% of TLTROs outstanding as of Nov ’22. Full repayment of TLTROs may have uneven impacts on banks’ LCR.

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The Corner
The Corner has a team of on-the-ground reporters in capital cities ranging from New York to Beijing. Their stories are edited by the teams at the Spanish magazine Consejeros (for members of companies’ boards of directors) and at the stock market news site Consenso Del Mercado (market consensus). They have worked in economics and communication for over 25 years.