Spanish banks rest on a mattress of 44,000 million euros, but they cannot fall asleep. According to the latest data offered by Santander, BBVA, CaixaBank and Sabadell, the entities exceed the ECB's requirements and arrive prepared for the new cycle of interest rate rises and higher credit prices. However, the European authorities do not lower their guard, they warn of a possible increase in the default of clients and prepare to submit them to new examinations.
As every year, the ECB has established requirements for each entity. It asks them for a minimum percentage of capital by 2023 to cover their risks. According to the figures offered to the CNMV at the end of September, the four banks added 153,912 million of good quality capital to cover 1.25 trillion of what in the jargon is known as risk-weighted assets (APR). It is 12.32% of the total, although the percentage is actually calculated bank by bank: Santander has a ratio of 12.24%, BBVA 12.45%, CaixaBank 12.38% and Sabadell 12.65%. .
Is it a lot or is it little? For now, enough. The ECB asks Santander for 8.91% this year, BBVA for 8.72%, CaixaBank for 8.44% and Sabadell for 8.65%. It is equivalent to demanding that all of them prove 109,940 million euros of what is known as CET1 or core capital, which is the sum of all their capital plus reserves. These are the funds that they can use with complete freedom to face the risks they have assumed. This shield has been required since 2014 to avoid a new financial crisis.
In volume, the effort claimed by the ECB is almost 44,000 million euros less than what the banks themselves have already made. Of course, each of them exceeds the percentage in a very different way. For example, the largest of them, Santander, had risk-weighted assets of 617,000 million euros in September, for which it has reserved a good-quality capital of about 74,600 million, compared to the 54,974 million requested by the ECB. .
At the other extreme is the smallest bank of the four, Sabadell, which responds to risks of 80,880 million with a capital of 10,110 million, above the 6,996 million requested by the ECB. BBVA covers a risk of 341,455 million with 42,511 million, compared to the 29,774 million requested. CaixaBank has a capital of about 26,700 million with which to respond to risks of 215,598 million, also above the 18,196 million required by the ECB.
This salad of figures is only the starting point because now is when the turbulence begins. The ECB has raised interest rates to 2.5% and the immediate result has been an improvement in bank margins, but also a tightening of loans to companies and individuals that could increase defaults and force entities to take more precautions.
On his last official visit to Madrid, the vice president of the ECB, Luis de Guindos, warned that "sooner or later the solvency of bank customers is going to be affected, and this must necessarily lead to an increase in provisions ”.
The credit rating agency Fitch assures in a report published last Friday that "in 2023 attention will be focused on the quality of the banks' assets as the pressure begins to shift to defaults" on debt.
This semester the European Banking Authority (EBA) will test the health of Santander, BBVA, CaixaBank, Sabadell and Bankinter, among other Spanish banks, as part of the tests it carries out every two years. Based on their 2022 accounts, they will calculate whether they are capable of resisting a hypothetical economic shock for three years. The results will be published in July.
For the stress test, the highest quality capital will be used again as a reference. Spanish banks complain that this emblematic division between the CET1 and the APR around which the diagnosis of the supervisors revolves does not favor them. The Bank of Spain is more demanding than other European supervisors when calculating APRs, so that national entities fare worse in the European photo.
In addition to the EBA simulations, the ECB's on-site inspections will be added, which this year will be more demanding to avoid risks associated with "disturbances" and "inflationary pressures" on the economy. The institution has already called for "extreme prudence on the part of credit institutions" in the face of the new scenario. According to it, banks must “strengthen their resilience to immediate macrofinancial and geopolitical shocks”, which are “significantly affecting the prospects of the European banking sector”.
