a new ghost banking crisis in ambush. The bankruptcy of Silicon Valley Bank and Signature Bank in the United States (USA), the collapse of Swiss Credit Suisse, and the collapse of the Deutsche Bank stock market, which plunged European institutions into a Black Friday last week, have stirred the financial world’s memories. accident that occurred fifteen years ago. But while this crisis has caught the canaries in much more debt and very limited savings, the situation is now drastically different. Bank deposits in Archipelago are at an all-time high. according to the data of Bank of SpainThe Islands’ families, companies and public administrations had saved 40 billion 977 million euros in financial institutions at the end of last year. An unprecedented number. On the contrary, the Canaries currently have a much lower level of credit than they had in 2008. If the amount owed at the time was more than 55,000 million euros, today it is 38,384 million, almost below 20,000 million.
However, what happened in these fifteen years to make this the case? On the one hand, the 2008 crisis led to a deep de-leverage in the established sectors of the Archipelago. The intense economic slowdown and the tightening of banks’ access to credit have lowered the Canary Islands’ debt levels. On the contrary, savings have only increased in recent years. Reason? The islanders’ aversion to risk means trying to keep money in their pockets during bad economic years. The trend to save has become almost imperative during the pandemic, as restrictions prevent us from spending a large portion of the leisure time we’re used to.
40
billion savings
Money invested in banking institutions by the established sectors of the archipelago reached 40,977 million euros at the end of last year. A registration number.
38
billion credits
The Canaries’ debt is much less than when the 2008 financial crisis broke out, and in particular, the loan amounted to 38,384 million euros at the end of 2022.
The expectation of obtaining higher deposit returns, which has not yet been realized in recent months, may also have fueled the desire to save. The rise in interest rates, initiated last year by the European Central Bank (ECB) as a strategy to contain runaway inflation, should have led to a higher deposit yield. But, The big banks did not start doing this, which prevented savers from compensating for the loss of purchasing power they had suffered due to the massive inflationary crisis.
According to the Consumer Price Index (CPI) between April 2021, when the price hike started, and February of this year – the latest data from the National Institute of Statistics (INE) – prices became 11.9% more expensive last year. Archipelago. What does it mean? The extraordinary increase in the cost of living means that Canaries can do less with the money they deposit in the banks. Actually, If the effect of inflation is subtracted from 40,977 million, the islanders have 4,877 million euros less money than at the time, because their purchasing power has decreased due to inflation, although it has increased by the same amount.
Now the specter of a new crisis is re-emerging, and fear could further increase savings levels. But financial instability casts doubt on whether the European Central Bank can continue with what it has taken so far: continued interest rate hikes to contain inflation. Continuation of this trend may endanger the stability of the financial sector, but failure to do so means not continuing with the strategy set to reduce inflation to the 2% target. In its first meeting after the start of the financial turmoil, the European Central Bank did not go beyond the scenario and increased the interest rates by half a point to 3.5%. Although its president, Christine Lagarde, this week rejected a commitment to continue raising interest rates.
‘rotates’ to sustain consumption
Digits turn to cards rotary to maintain consumption levels in the face of an inflationary spiral that undermines their purchasing power. The loan linked to this mechanism increased by 1 billion 400 million euros across Spain last year, reaching its highest figure since 2019. According to the data of the Central Bank of Spain, consumers have a total debt of 11 billion 465 million euros over these cards, which they have microcredit. to make payments they deem appropriate up to the amount they authorize. However, the biggest debt for Spaniards remains the debt associated with a home. At the end of 2022, the country-wide total amounted to 65,220 million. That’s the highest amount since at least 2013. It’s not surprising, though, that it rose last year after the real estate boom boomed due to the low interest rates that dominated the market until last summer. | DG
Source: Informacion
James Sean is a writer for “Social Bites”. He covers a wide range of topics, bringing the latest news and developments to his readers. With a keen sense of what’s important and a passion for writing, James delivers unique and insightful articles that keep his readers informed and engaged.