Tightening bank financing terms and conditions: Current situation and implications
Fecha: mayo 2023
Joaquín Maudos
Financing conditions
SEFO, Spanish and International Economic & Financial Outlook, V. 12 N.º 3 (May 2023)
Access to bank loans has become tougher in recent months primarily as a result of the increase in interest rates. Borrowing rates have risen due to a combination of factors: central bank rate hikes; perceptions of increase in risk; an increase in the banks’ aversion to lend; the prospect of an economic slowdown; and the recent bout of financial instability. That said, since January 2021, when 12-month Euribor hit a record low, Spanish banks’ lending rates have increased by less than in the eurozone on the whole. Specifically, however, while corporate lending rates in Spain are lower than the eurozone average, mortgage and consumer lending rates are higher. The rate of growth in new lending activity has slowed, with business lending outpacing household lending by a wide margin. The growth in interest rates is leaving businesses and households poorer. Considering that in 2022, businesses earmarked 6.9% of their gross disposable income to the payment of 14.36 billion euros of interest, with households spending 0.8% (6.44 billion euros), an increase of 2 percentage points in borrowing costs in 2023 would increase the two segments’ interest burden by a combined 33 billion euros. The good news is that both the business and household segments are better positioned to tackle the increase in borrowing costs than in the past thanks to significant deleveraging: the ratio of private debt-to-GDP decreased by 23pp between 2020 and 2022.