Credit risk and provisions: Prudent management across the Spanish and European banks
Provisioning effort
Fecha: septiembre 2024
Marta Alberni, Ángel Berges and María Rodriguez
SEFO, Spanish and International Economic & Financial Outlook, V. 13 N.º5 (September 2024)
The banks’ excellent earnings performance over the past two years, in both Spain and Europe, has been driven mainly by growth in net interest income. Interestingly, this momentum in margins, on the back of high benchmark rates, has not had an adverse impact on asset quality. Indeed, the downward trend in non-performance, observed in the Spanish banking system for nearly a decade now, has not been altered substantially by this new high-rate scenario, with both the non-performance and Stage 2 ratios holding steady, barely ticking higher after two years of sharply higher interest rates. Within this context of subdued non-performance, it is worth singling out the prudent provisioning effort being made by the Spanish banks, and the European banks in general, so far this year, recognising considerably more provisions (overlays) than they are required to do under applicable accounting standards and banking regulations.