It has been a little lifting the carpet and see that in Spain we have a serious problem with the loan-to-deposit ratio . According to Good Finance this week , the ratio between what they lend and what our banks collect is 187 to 100 . In December this ratio was 183% and a year ago, 182% , according to data from the Bank of Spain, which does not seem to lead us to the conclusion that the thing will fix itself.
Why are these figures suddenly important?
Well, they are very important given the possibility of Spain asking for a ransom. And because? Because Europe could very well force our banks to lower this ratio before intervening , in the same way it has done with Ireland and Portugal. Specifically, Ireland has been required to reach a proportion of 122.5% in 2013 and Portugal, 120% in 2014.
To locate us, if Brussels imposed us a ratio like that of Ireland or Portugal, Spanish banks would have to reduce their loans between 14% and 24% , as published by a report by Daragh Quinn and Duncan Farr, the analysts at Nomura International .
According to these analysts, ” We could see the emergence of a war of deposits , by putting additional pressure on income .” And according to Eamonn Hughes, Dublin-based analyst of Goodbody Securities, “ The first consequence of a lower loan-deposit relationship is that you have to identify assets to sell (…) It also forces you to pay for deposits, as we have seen in the case of Ireland “.
Now let’s get back to our daily reality
To the desperate 4.50% APR of the best deposits in September , to the banks that no longer give credits or shots, to the 30,000 million that the Spaniards withdrew in July from the entities, since the thing does not fix itself. Well, at this point, banks are supposed to close the credit tap more (yet) and try to get money from staff with (even) higher returns.
Closing more credit does not cost believing. Week by week, we see how mortgages become more expensive and offers of fast money increase in entities not regulated by the Bank. And to raise more capital by launching more aggressive deposits … From HelpMyCash we believe that profitability can not give much more of itself (this week we have seen a 4% APR in Santander !), Although it would make sense to increase the profitability of 6-month deposits as they are items that allow to announce a brand new 4% APR (annual) and pay only half (6 months).
The only certainty is that these requirements were not included
At the moment, the only certainty is that these requirements were not included in the memorandum of understanding in July, which dealt with our bank bailout. We will see what this all ends because, as Simon Maughan, financial strategist at Olivetree Securities points out in London, ” There are significant outflows of deposits now in Spain and they won’t start coming back until people are sure that their money is safe and that Spain is safe .” And of course Spain will be safe when rescued. Anyway, the fish that bites its tail.