this bank default still missing. Neither the crisis caused by the pandemic nor the growing economic problems caused by the inflationary spiral have led to an increase in credit defaults to date. In June, the doubtful loan ratio decreased from 4.08% to 3.8% of total loans. It fell below 4% for the first time since January 2009 and reaches its lowest level since the onset of the Great Financial Crisis. To put it in perspective, the historical maximum reached 13.77% in December 2013 and remained at 4.78% just before the outbreak of the coronavirus in December 2019.
According to data released by the Bank of Spain this Friday, the improvement in the rate was due to the good behavior of its two constituents. Like this loans to companies and families increased by 0.9% Up to 1.182 billion euros compared to May. Therefore, the decrease in demand predicted by the European Central Bank (ECB) due to inflation has not yet materialized. Unpaid assets decreased 6.3% to 44,973 million.
What is common when the economy is in trouble is that credit defaults increase as households and companies struggle to meet their debts due to falling incomes. However, the unprecedented public support for the private sector in the last two and a half years explains why the decline in NPLs has not stopped. Since the outbreak of the epidemic, therefore, Loans to the private sector increased by 47,366 million and 4.2 percentTroubled debts were reduced by 9.328 million and 17%.
last yawn
This development, however, is facing a final stretch. Since last spring, officials and banks have predicted that the default rate will start to rise around this summer, and will do so steadily over the coming months. The extent of this increase will depend on its impact on the country’s economy. inflationary spiralaggravated by the war in Ukraine and the possible interruption of Russia’s gas supplies to Europe. In any case, the industry is confident that this will be a manageable rise and anticipates that the rate hike will be encouraged by the European Central Bank (ECB) and will continue to increase as a result. increase in wagesIt will be affordable for your customers.
In addition to the loss of purchasing power of households and companies due to rising prices, another important factor is the vast majority of shortfalls in principal payments of loans to companies with public guarantees between April and November. The ICO will expire. . Since that time There will be companies that will not be able to meet the quotas. As they would have to pay the principal in addition to the interest which would in principle cause the defaults to start increasing from July or August (a loan must have three months of outstanding balance to be considered late). Officials predict that yes, they will not all default at once, it will be a gradual process that will take several months.
Moreover, the hidden risks did not stop the growth. According to the latest data from the supervisor, at the end of December, banks 94,000 million Euros in private custody In Spain, due to the high risk of default, which is equivalent to 8.1% of the financing they provide to companies and households, representing a growth of 1% since June and 14% in the twelve months. And this is before the impact of the invasion of Ukraine.
manageable walking
Last March, after the outbreak of war, The bank estimated that defaults would increase between 5% and 6%. in the second half of this year. That is far from the 11-15% calculated at the beginning of the pandemic, or the 5-8% expected in the middle of last year. However, high uncertainty about the duration of the war and the consequences of its inflation clouded the picture and made it difficult to make a prediction.
The defaults are a key variable banking business because the regulation obliges businesses to set aside money to deal with losses caused by arrears so that their solvency is not affected. Therefore, the larger these outstanding loans, the less profitable the organizations will be and the less resources they have to finance families and companies, resulting in an impact on economic growth.