The bank toughens the granting of loans due to the increase in risks due to the pandemic

Customers using Unicaja ATMs in Ronda (Malaga) .JON NAZCA / Reuters

The moratoriums on mortgage and consumer loans keep the delinquency rate of Spanish banks at bay for now, but entities fear that the delicate economic situation will multiply defaults soon.

And that concern has been transferred to the granting of loans.

"The greater risks perceived in a context of strong deterioration, both in the general economic situation and in the solvency of borrowers and specific sectors, would have favored a tightening of the granting criteria in all modalities", states the Survey on Bank Loans published this Tuesday by the Bank of Spain.

The ten financial entities consulted by the Spanish regulator acknowledge that in the last three months the criteria for granting loans to both companies and citizens interested in buying a home or consumer goods have tightened.

Its conditions are also now more restrictive, except in the case of mortgages, which remain unchanged and are the only ones that have grown between July and September.

Once the rigorous confinement has relaxed, real estate operations gradually recover their pulse, which has led to an increase in demand for mortgages, the only credit category in which it rises.

The opposite happened in the case of companies, which saw their usual income grow and therefore did not have to resort as much to loans as in the previous quarter, when “a strong increase was detected to finance the large liquidity needs generated in the companies in that period ”, that of the bolt.

The tightening of criteria and conditions by the banks was not the ideal environment to make consumer credit grow, which, unlike what happened in the euro area, continued to decline, “although at a considerably slower rate than in the previous quarter. ”.

The European Central Bank, which has presented the results of the survey at European level, reduces the red flags.

He points to the banks of France and Spain as the ones that have hardened credit to companies among the major economies - unlike Italy, which keeps it unchanged - but points out that it may be a return to pre-pandemic levels after having relaxed requirements in the second quarter, in the worst of economic hibernation.

The short-term prospects for the future are not promising.

Spanish banks anticipate a further tightening of the criteria for granting loans in all segments.

And business loan applications are expected to drop.

"In the fourth quarter, banks predict that credit to companies will tighten further, reflecting concerns about the recovery, with some sectors still vulnerable, as well as uncertainties surrounding the extension of fiscal support measures" .

Banks also predict a tightening in the rest of the segments, and a fall in demand for business and consumer credit, while requests for home purchases will remain stable.

ING analysts warn that if restrictions in the second wave are intensified due to the increase in infections, emergency liquidity needs will increase again in the fourth quarter due to its negative effect on company revenues.

"That could lead to another cautious increase in bank lending, although we expect it to be a much smaller effect than that seen in March," they conclude.