Demand, Not Supply, Is The Problem Affecting Credit In Spain

Spanish banks credit lending

J.L.M. Campuzano (Spanish Banking Association) | The private sector in Spain is continuing to reduce debt. Financing for companies and households has fallen an annual 0.7% and 1.7% respectively, according to August data from the Bank of Spain. One might conclude from these figures that there is still restrictions on credit in Spain. But nothing could be further from the truth.

The Bank of Spain’s recent report highlights that during the last few months, the interest rates on bank loans for households and companies have remained at reduced levels.

At the same time, the volume of new loans to companies for an amount of over 1 million euros, which are mainly used by the big companies, continued to fall. This is partly due to these companies relatively greater preference for financing themselves via debt issues, to the detriment of bank credit.

In terms of outstanding balances, the interannual declines in loans to households and companies were also more moderate over the past few months.

In line with the conclusions in the latest Survey, financial entities relaxed once again bank credit standards for houlseholds during Q2 and maintained for companies, but conditions in both cases did improve.

But what is happening to credit demand? The same survey flagged that the demand for new loans was more moderate in the case of households, while marginally increasing in the case of SMEs. But it clearly declined in the case of large companies.

Given all the above, can we really say that credit conditions are not improving? Once again, that’s not true. The banks are the first ones interested giving credit. It’s their business. The problem, if it really is a problem, is not the supply of credit from the banks. In the end, it’s the demand for credit. For example, in the case of large companies, which have accumulated liquidity and alternative funding sources. Something which is more worrying, if it persists, is the inertia in the demand for credit from households and SMEs. And don’t confuse the latter with the process of debt adjustment which, in my view, may be near its end.


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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.