The Spanish Central Bank is implementing strict measures to ensure that banks do not relax their lending standards, particularly in mortgage lending, due to heightened financial risks.
The financial crisis that erupted in Spain in 2008 due to the bursting of the real estate bubble has taught the importance of extreme caution. Mercedes Olano, Director of Supervision at the Spanish Central Bank, highlighted during the presentation of the 2023 Supervision Report that the risks associated with lending, especially mortgages, pose a significant threat to the financial system in Europe. The banking sector, primarily focused on commercial activities, is closely monitored by regulators. Specific controls have already been conducted to determine if banks have relaxed their lending criteria.
Focus on commercial real estate
According to Olano, commercial real estate lending comprises only 8% of the balances of Spanish banks. This type of credit is mainly concentrated in offices, stores, and hotels, and less so in shopping centres, which are currently considered more risky. The Banco de España is relatively confident about the lending for home purchases and credits to developers, which also account for only 8% of the total credit portfolio.
Collaboration with the financial customer defense authority
It is crucial that there is intensive collaboration between the Banco de España and the newly forming Financial Customer Defense Authority. This authority will handle complaints from financial consumers, a task currently divided among the Banco de España, the National Securities Market Commission (CNMV), and the Directorate General of Insurance.
Increased inspections and ongoing oversight
A key goal for the Spanish Central Bank this year is to increase ‘in situ’ inspections of banks. This approach aligns with the objectives set last year but now places greater emphasis on direct controls. Priorities include strengthening the financial sector’s resilience against macro-financial and geopolitical shocks and continuously monitoring the persistent shortcomings identified during the 2020 pandemic.
Increase in sanctions
In the fight against negligence and risky management, the Banco de España initiated 11 sanctioning procedures against various banks and their executives last year, more than in 2022. These sanctions were primarily focused on prudential aspects, designed to ensure the stability and solvency of financial institutions. Six out of nine procedures were resolved. These measures are essential to maintain the stability of the Spanish banking system and to protect consumers from potential financial instability.
