Since the beginning of the crisis, the world’s leading central banks have been implementing expansionary monetary measures that were previously unimaginable. In addition to traditional measures, such as penalizing bank deposits or excess liquidity, central banks have purchased assets on the market and provided an implicit guarantee that they would maintain expansionary financial conditions in the future. <\/p>\n
The fundamental argument for this ultra-loose, extreme, and exceptional monetary policy has been twofold: to ease credit conditions and to stimulate lending to the economy. Banks are not the beneficiaries of this monetary policy, but rather its instrument, its transmission belt. They are the intermediaries that deliver this financing to the rest of the economic agents so that they can spend and invest. <\/p>\n
Spain is one of the best examples of how banks transmit these favorable financial conditions to the economy. Firstly, Spanish banks have applied a reduction in interest rates on the loans they grant that is greater than the European average, reaching historic lows. Secondly, their high availability of funds to lend to households and businesses has translated into a double-digit growth rate in new loans, which contributes decisively to the greater dynamism of the Spanish economy compared to what was initially expected. <\/p>\n
Without a doubt, Spanish banks have fulfilled the objective pursued by the ECB. And they continue to do so. Currently, they account for 22% of the monetary authority’s medium-term loans, focused especially on financing SMEs in the case of operations known as TLTRO II. But they also maintain an excess of liquidity estimated at just over 6,000 million euros in the central bank itself, ready to continue providing the additional financing required by the Spanish economy. <\/p>\n
Taken together, the ECB financing obtained by Spanish banks represents 4% of total liabilities. This is a prudent distribution of liabilities if one takes into account the greater relative weight of deposits on the balance sheets of Spanish banks compared to the European average. According to ECB data, the loan-to-deposit ratio in Spanish banks stood at 116 in mid-2017, well below the levels existing before the crisis. <\/p>\n
The body headed by Mario Draghi continues to defend the importance of maintaining the expansionary nature of current monetary policy. However, it has an increasingly clear strategy for the future that involves a progressive adjustment, first with the gradual reduction in the volume of debt purchases in the market and later with the upward adjustment of official interest rates. <\/p>\n
Sooner rather than later, the European monetary authority will opt to raise the negative interest rate that penalizes the excess liquidity of credit institutions held in the central bank itself. The end of interest rates in negative territory should not be understood as the beginning of a restrictive policy. Rather, it is the end of a distorting factor in the markets and in the general allocation of resources against risks. At the time, penalizing banks for their excess liquidity served to mobilize it and spurred lending. But in light of the data on the evolution of loans and financing conditions, this argument has lost its validity today. <\/p>\n
Jos\u00e9 Luis Mart\u00ednez Campuzano, AEB Spokesperson<\/p>\n