Banks raised delinquency levels after a rise in non-payments in August. According to data published this Monday by the Bank of Spain, the default rate in the financial sector stood at 3.56% last month, which represents a slight increase compared to previous months and remained at 3.5% in June. and July.
In particular, non-performing loans grew by 326 million in August, reaching a total portfolio of 42.1 billion. In addition, it should be taken into account that during the period of reduced credit due to the increase in prices due to the increase in interest rates and greater restrictions on access to financing, the credit portfolio contracted by 1,183 billion euros, less than 1,194 billion registered in July , which also contributed to this increase in delinquencies.
In any case, despite the increase, the default rate remains at the minimum level. In a year-to-year comparison, credit delinquency increased from 3.86 in August 2022 to the aforementioned 3.56% in August of this year, representing a decrease of 0.3 percentage points. In millions, the balance decreased by more than 5.1 billion.
On the other hand, provisions to cover unpaid loans also increased slightly to 30,229 million at the end of August (+127 million compared to the month of July), but were at the minimum level of the new recent years (in August 2022 they amounted to 32,981 million. ).
It happened that the banking supervisors (the Bank of Spain and the European Central Bank) asked the entities for caution so that they allocate more profits that they have obtained thanks to driving the continuous increase in interest rates to strengthen the mattresses to cover possible insolvencies. Rates went from 0% to as high as 4.5% in just 14 months, making variable loans and new financing more expensive, for households and companies. In that sense, after years in which bank defaults have entered, some banks have begun to experience a slight increase in defaults.
The ECB tightened its watch on the behavior of the portfolios of European entities, because the supervisor expects an increase in arrears, but wants to avoid fears and therefore asks for more caution.