The banks close the tap on business credit given the deterioration of the economic outlook for 2021 and the foreseeable increase in the delinquency ratios on their balance sheets in the first months of the year.

The entities reduced their financing offer in the last quarter of 2020 and plan to continue doing so in the first quarter of this year, according to the latest

Survey of Bank Loans

distributed this Tuesday by the Bank of Spain.

The closing of credit was also extended to families through consumer loans, although this phenomenon had already been occurring in recent years.

In the case of mortgages, the financing offer does not suffer due to the great competition that exists between entities, although the denial rates do increase for those who ask for money to buy a house.

The closing of the credit tap is not worrying for now because there is no strong demand for financing from companies either.

With the liquidity needs covered for now with the ICO guarantee programs, very few companies think about making investments in the face of the economic uncertainty in the coming months.

The big problem will occur when these financing restrictions on the part of the banks converge with the new increase in liquidity needs by companies expected next spring.

At that moment, part of the ICO guarantee lines granted in 2020 will expire and there will be new companies that after a year of stoic endurance will need more oxygen to continue if economic activity does not improve.

This is stated by the financial supervisor and the sector itself, represented by the

AEB and CECA

employers' associations

, in an agreement signed between the parties to guarantee the transfer of information from the supervisor's risk center to the entities so that they can prepare a detailed study on the potential impact on their balance sheets and seek solutions to recapitalize troubled companies.

"The continued decline in activity could lead to non-financial companies and the self-employed facing additional liquidity strains especially from spring 2021, which could have an impact on the economic recovery and ultimately , in the capacity of the banking sector to continue financing the productive activity ", indicates the agreement, published yesterday in the BOE.

Added to this is the progressive increase in the request for moratoriums on the payment of credits by families after the return of the summer.

These are households that withstood the first months of confinement well, but to which the delay in receiving aid such as ERTE or the lengthening of the crisis has forced them to request the temporary suspension of their credit.

This has led the Ministry of Economic Affairs to extend the moratorium program for another three months, as announced yesterday by Vice President

Nadia Calviño.

The reduction in the supply of credit has affected both large companies and SMEs, although it has been especially relevant in two of the sectors most affected by the crisis:

commerce and construction

.

The first, affected by the growing and diverse number of restrictions in several CCAA as an attempt to stop the expansion of the Covid, and the second due to the poor prospects for the sector.

The demand for mortgages in Spain will take time to recover, according to the entities.

"The main reason that would explain the contraction of the credit supply would be the increase in the perceived risks, linked to the deterioration in the outlook, both regarding the general economic situation and the solvency of borrowers and specific sectors," explains the financial supervisor.

This has resulted in a slight increase in the margins applied to loans, both ordinary and those with higher risk, a decrease in the amount granted and an increase in the guarantees required.

For the first quarter of this year, Spanish entities expect a further tightening of the concession criteria in the segment of financing to companies and stability in financing to households, while in the euro zone a prolongation of the contraction of supply in all modalities.

According to the criteria of The Trust Project

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