The talks between banks and the government to move beyond support measures for unprotected mortgages confront insolvency risks tied to the rising Euribor, while still aiming to resolve related issues. In this context, the sector seeks to ensure that extending loan maturities to the Ministry of Economy by up to five years does not force banks to set aside extra provisions for potential future defaults and the resulting impact on earnings. Sources affirm this stance, yet there is broad agreement that sustaining it over time will be challenging.
The Royal Decree proposal, prepared by EFE and accessed by the employers’ associations AEB and CECA, was presented to the Economy ministry at a Tuesday meeting. Two items remain open for negotiation. First, applying the measure regardless of a customer’s credibility assessment. Second, guaranteeing that the extension of loan maturities would not be counted for provisioning purposes, meaning those loans would either be excluded or placed in a special surveillance category.
Most loans, including mortgages, are categorized in the normal risk bucket. This category covers borrowing where the default risk has not risen significantly since initial recognition. Regulations require banks to hold provisions equivalent to expected losses over a twelve‑month horizon. In contrast, non‑performing loans with a notably higher risk of non‑payment fall under normal risk with special supervision, which obliges institutions to reserve a portion of expected losses for the full term of the loan.
Flexibility
Banks contend that in the current environment, and as a support measure for vulnerable mortgages, extending the maturity by five years should not be viewed as a meaningful uptick in default risk, which could push loans into private custody and necessitate larger provisions. They maintain that these provisions should be required only when the borrower misses payments for more than three months and thus defaults. However, accounting standards are not perfectly precise on this point, so a flexible treatment was recommended in the early phase of the pandemic, as allowed by the European Banking Authority (EBA).
It remains unclear whether a national law would permit such flexibility without protection from a European body like the EBA. Additionally, Nadia Calviño, vice president of economics, reiterated that she does not want a one‑size‑fits‑all measure such as a broad industry extension for distressed mortgage holders. She has stressed, for the second day running, that her ministry and the industry are working on what was described as a practical and targeted solution set.
Insufficient
After a meeting with Christine Lagarde, President of the European Central Bank (ECB), the vice president commented on the banks’ commitment and willingness to participate in reaching an agreement. Banks have proposed various options, and teams are currently analyzing them in Madrid to identify which measures can be most effective as soon as possible. Labor Minister Yolanda Díaz called the offers from banks insufficient and urged further action. In this context, CaixaBank has proposed freezing vulnerable mortgage quotas for a year as discussions progress, signaling a preference for concrete relief in the near term.
The exchange reflects a broader debate about stabilizing household debt while preserving bank solvency. Authorities are weighing the immediate need to ease financial pressure on families against the longer‑term objective of maintaining prudent lending practices. Observers note that the outcome will depend on how well the measures align with European rules and how quickly the sector can implement changes without compromising sound risk management. The dialogue continues as policymakers and banks seek a balanced path forward, with all sides recognizing that swift, meaningful relief must be paired with robust safeguards against future shocks.