The Bank is further tightening the conditions for mortgages, consumer credit and commercial loans

The headquarters of the European Central Bank in Frankfurt.DPA via Europa Press (DPA via Europa Press)

Spanish banking Conditions for granting real estate loans and credit Consumer and commercial loans during the second quarter of the year. This is reflected in a survey of bank loans published today by the European Central Bank (ECB), in which the supervisor notes that higher rates, increased risk on the part of clients, and banks’ lower tolerance for such exposure have prompted entities to apply stricter criteria when granting financing. Of course, the emphasis was less severe than in previous seasons.

“Realization of the greater risks associated with the economic outlook and the specific situation of the borrower, lower tolerance for risk and higher cost of financing contributed to the tightening,” explains the ECB. Thus, 14% of European banks claim that they have raised requirements for granting financing to companies, 8% have increased mortgage requirements and 18% of entities have tightened consumer credit. Similarly, the supervisor highlights a slowdown in credit demand and this has sent corporate financing down to historic lows.

Specifically, with regard to Spain, Corporate credit tightening It was weaker than the EU average. And 8% of the banks confirmed that they have raised the levels of demand for granting financing. This is a lower level than the previous quarter (17%) but is the seventh consecutive quarter in which entities have reported more stringent conditions for obtaining credit. In addition, the supervisor maintains, overall, the cumulative net tightening since the start of 2022 has been “significant.” The main reason for applying these stricter requirements relates to risks related to the economic prospects and the specific situations of each company.

with regard to loans to buy a home, The tightening of mortgage conditions (10% of Spanish banks acknowledged their application compared to 20% in the previous quarter) was above the European average. The entities have implemented more stringent terms due to the greater perception of risk by the entities in relation to the ability of customers to repay. However, banks expect conditions to persist in the third quarter and not tighten further.

In terms of consumer credit, the tightening was more pronounced than in the euro area. Thus, 25% of banks claimed that they applied more stringent standards (in the previous quarter it was 33%). As in the case of corporate loans and mortgages, the main reason for applying these stricter measures was the higher risk perception and lower risk tolerance of banks. In addition, tightening is expected again for the third quarter. Likewise, the demand for credit decreased due to higher financing costs.

In fact, the tightening of access to finance and the decline in demand are normal operations within the monetary policy that the European Central Bank has been implementing in the past year, which Led to a rise in interest rates from 0% to the current 4%. The supervisor’s goal is to reduce the high inflation in the eurozone and for this he raised prices with the aim of reducing consumption and demand so that prices fall.

banks are subject to Regulations that require them to give responsible credit. Among other things, this means that at the time of accepting the loan, the entity has to carry out an examination to assess the solvency of the company and ensure that customers can pay the installments throughout the credit period. Given that macro conditions have become more pressing after the new interest rate hike, so is this test.

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