Bank lending to the ECB shows shifts in Spain’s financial landscape
The debt that Spanish banks owe to the European Central Bank reflects how actively they tapped central-bank financing during the euro-area adjustments. In December, the total stood at 192,970 million euros, which is 29.4% lower than November and 80,698 million euros less in absolute terms, according to Eurosystem financing data released by the Bank of Spain on Friday.
As a result, the liabilities of Spanish banks to the central bank have fallen to the lowest level seen since May 2020, when the Covid-19 pandemic prompted liquidity support for the financial sector. At that time, liabilities reached 176,040 million euros as authorities sought to cushion the economy against the health crisis and its restrictions.
On an annual basis, the decline in Spanish banks’ debt to the ECB was 33.3%, translating to a reduction of 96,591 million euros.
The decrease aligns with a broader normalization of monetary policy. The ECB has raised rates and began the earlier repayment of liquidity provided to banks through programs launched during the Covid-19 period, including the TLTRO-III operations and related measures.
Regarding the Eurosystem’s overall borrowing appeal, total lending from the ECB decreased by 19.4% in December, reaching 1,640 billion euros. This figure is 25.6% lower than the level recorded a year earlier.
Thus, the share of Spanish banks within the European system’s total debt to the issuing institution stood at 11.7% in December, down from 13.4% in November, but above the 13.10% level reached in November 2021.
Asset purchases
Turning to asset purchases, the total volume bought under the ECB’s various programs since 2009 reached 624,428 million euros in December for Spain.
Across the Eurosystem, the cumulative asset purchases amounted to 4.96 trillion euros in the last month of 2022. This represents a monthly increase of 0.02% and an annual rise of 5.10%.
Data from the Bank of Spain show that the asset purchases in Spain accounted for 12.62% of the Eurosystem’s consolidated balance sheet in Spain, up slightly from 12.60% in November and 12.58% a year earlier.
Benefits of higher rates
The Bank of Spain highlights notable reshaping of liquidity positions in light of the higher interest rates. The ECB’s rate increases have encouraged banks to reassess deposit balances on reserve accounts. The current reference rate for deposits sits at 2%.
Between September and October, the total of permanent loans held by Spanish banks rose to 370,865 million euros, then fell to 297,060 million euros in December, before improving again to 353,914 million euros in November.