The Spanish banking sector was the major petitioner of the ECB’s liquidity (up to a third of the total). Thus, in the 2012 summer –which was the most critical moment, it reached a debt level of €390 billion with the ECB (a part of which was maintained as deposit in the ECB itself with a yield lower than the cost). It was a sort of life insurance.
The other part was dedicated to finance the national public debt with yields higher than the cost –which was another yield insurance. However there was the uncertainty in the deadline, which was a threat for the future because the amount lent to the Treasury was on a longer term than the one gathered from the ECB.
This year, Spanish banks have reduced their demands to the ECB, and outstanding debt in late April was in €180 billion, with a downward trend. The explanation is the credit crunch, due to the growth in deposits and the recovery in issuances to wholesale markets.
It is a process of returning to normality that still needs some months to consolidate its position –a position which will be enough to recover the level of the balances and which will help lending (after all that is precisely the social aim of the banking business).
Other different question is the profitability –essential for the future, which has however gone to the background due to the burdens imposed by solvency and liquidity. Going out of the critical state, that is the question, as well as getting rid of the ECB’s leakage.