UPDATE 1-Bank of Spain asks banks to monitor state guaranteed loans

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MADRID, September 30 (Reuters) – Spanish banks should carefully monitor the performance of state-guaranteed loans granted during the COVID-19 pandemic to identify risks and any potential increase in bad debts, the vice said on Thursday. -governor of the central bank.

Last year, the government approved up to € 100 billion in ICO liquidity lines, where Spain guaranteed up to 80% of the loans that were channeled by banks to small and medium-sized businesses and businesses. independent.

“The evolution of these portfolios will need to be monitored over the next few months … as the few remaining waivers … have expired and also due to the performance of ICO-backed exposures,” said the vice-governor of the Bank of Spain, Margarita Delgado financial event.

Delgado said assets under special watch, or considered to be subject to increased credit risk, had increased in recent quarters but were still at a “relatively low level”, including in hard hit areas such as tourism .

The deputy governor urged lenders to continue building their capital reserves and not relax provisions to deal with a potential increase in bad debts.

“There should be no rush to write off last year’s provisions until there is full confidence that the loan portfolio is working as intended,” she said.

Bad debts have so far not increased in Spain due to guarantees and moratoria, but could increase once those protections are removed, analysts say.

In July, bad debts of Spanish banks stood at 4.39%, their lowest level since March 2009.

Several Spanish banks have merged to deal with the effects of ultra-low interest rates and a potential increase in bad debts.

Delgado said there appeared to be more limited scope for mergers after a wave of consolidation that took the number of Spanish lenders to 10 from 55 before the 2008 financial crisis.

Report by Jesús Aguado; Editing by Emma Pinedo and Edmund Blair

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