Bank of Spain asks banks to monitor subsidized loans amid Ukraine crisis uncertainty

A woman walks past a branch of the Bank of Spain, during the coronavirus disease (COVID-19) outbreak, in the Andalusian capital of Seville, Spain, April 10, 2020. REUTERS/Marcelo del Pozo

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MADRID, March 29 (Reuters) – Spanish banks must carefully monitor the risks and a potential increase in bad debts on state-guaranteed loans made during the pandemic, as repayment freezes are lifted and the indirect impacts of the war in Ukraine are manifesting themselves in credit portfolios, the Bank said. of the Spanish vice-governor said on Tuesday.

“There are still many uncertainties around the economy, now fueled by the Ukraine crisis and we therefore need to be vigilant on the evolution of loans, especially now that the grace periods for loans guaranteed by the ICOs are going to start being lifted,” Deputy Governor Margarita Delgado said.

In 2020, the government approved up to 140 billion euros ($155.39 billion) of so-called ICO liquidity lines, where Spain guaranteed up to 80% of loans that were channeled through banks. small and medium-sized enterprises and the self-employed. .

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On Tuesday, the government approved a new €10 billion line of subsidized loans, with a 12-month repayment freeze, or so-called grace periods, where companies are required to pay only interest and not the principal of a loan. Read more

On existing COVID-19 loans, the government has generally extended maturities from eight to 10 years and automatically extended grace periods by six months.

Delgado said on Tuesday that she expects companies to start bearing the financial burden of loan repayments in the second quarter.

Regarding bad debts, Delgado said that in 2021, the volume of non-performing assets followed the downward trend of the past few years, “although at a much slower pace compared to what s was produced before the pandemic”.

In January, non-performing loans from Spanish banks stood at 4.32%, still far from their peak of 13.6% in December 2013.

Delgado said, however, that the growth of loans subject to special monitoring, or considered to be subject to increased credit risk, had been moderate in the last half of last year, “although it continues to grow at double digit rate.

($1 = 0.9010 euros)

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Reporting by Jesús Aguado; edited by John O’Donnell and William Maclean

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