Publications

Financial analysis

From this page you can access thematically grouped Analytical Articles published in the Economic Bulletin from 1999, ordered by date of dissemination within each year.

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  • 16/12/2020
    The impact of unconventional monetary policies on perceptions of extreme events at times of crisis (490 KB) Irma Alonso

    The European Central Bank’s and the Federal Reserve’s announcements of unconventional monetary policies have contributed to significantly reducing market perceptions of the probability of extreme macro-financial events. This phenomenon has arisen in periods of intense market strain, such as the global financial crisis and the current COVID-19 crisis. These measures have served to mitigate the materialisation of extremely unfavourable events through the feedback loop between the financial sector and the real economy and to ensure adequate monetary policy transmission.

  • 01/12/2020
    The impact of the COVID-19 crisis on the financial position of non-financial corporations in 2020: CBSO-based evidence (620 KB) Roberto Blanco, Sergio Mayordomo, Álvaro Menéndez and Maristela Mulino

    The first part of this article describes developments in the profitability, solvency and liquidity of Spanish non-financial corporations, drawing on the integrated CBSO database, which contains annual information up to 2019. This analysis evidences that, at end-2019, the corporate sector was in a relatively strong position to withstand an adverse shock. This was, however, compatible with the existence of segments that were in a more vulnerable position. It then analyses the impact of the COVID-19 crisis on the firms’ financial position, on the basis of Central Balance Sheet Data Office Quarterly Survey data for the first three quarters of 2020, which include a relatively small number of generally large firms. The COVID-19 crisis has triggered steep drops in ordinary earnings, employment and profitability levels in this sample of firms. In addition, extraordinary gains and losses have performed very negatively. This has led this group of firms to record a net loss in the Central Balance Sheet Data Office Quarterly Survey for the first time since 2002. The financial position of these firms has also deteriorated in 2020. The average debt ratios and the average debt burden ratio have risen, caused by both higher corporate debt and, to a greater degree, lower ordinary earnings. However, the firms have increased their liquidity buffers as a precautionary measure. The article also includes two boxes. Respectively, these analyse the impact of the COVID-19 crisis on the profitability and the solvency of the corporate sector in 2020, on the basis of various microsimulations. The findings of Box 1 show that the decline in profitability appears to have been particularly steep in the SME segment and, especially, in the sectors hardest hit by the crisis. Box 2 evidences that the crisis seems to have prompted a sharp rise in the financial pressure borne by the firms, in addition to undermining, albeit more moderately, their solvency.

  • 17/11/2020
    Recent developments in the cost of bank equity in Europe (410 KB) Luis Fernández Lafuerza and Javier Mencía

    This article assesses the cost of bank equity in Spain and the euro area since 2007, focusing particularly on the period of the COVID-19 pandemic. There was a marked rise in the cost of equity in March 2020, followed by a decline in the subsequent months. The article assesses the factors responsible for this movement, and compares it against the change in interest rates on alternative bank funding instruments.

  • 03/11/2020
    Inflation persistence in the euro area: the role of expectations (326 KB) Pablo Aguilar

    This article analyses agents’ perception of the period of low inflation in recent years, in the context of a model in which these agents form their expectations on the basis of simple forecasting rules. The approach used allows a distinction to be drawn between which portion of the low inflation phenomenon might be due to temporary factors and which might be considered permanent. The results of the analysis for the euro area suggest that agents perceive the inflation rate’s recent departure from the monetary policy objective to be predominantly temporary, although these deviations are marked by a considerable degree of persistence. In comparative terms, the estimated persistence in the case of the euro area of the deviations observed from the inflation target approximately double those in the United States over the 1-and 5-year horizons.

  • 27/10/2020
    October 2020 Bank Lending Survey in Spain (533 KB) Álvaro Menéndez Pujadas and Maristela Mulino

    The latest Bank Lending Survey results show a widespread contraction of credit supply both in Spain and in the euro area in 2020 Q3, which would be linked to increased risk perception. On the demand side, demand from firms fell in both Spain and the euro area following the marked increase recorded between April and June. Conversely, applications for loans to households for house purchase rose both in Spain and in the euro area, while applications for consumer credit and other lending continued to decline in Spain, albeit at a considerably slower pace than in the previous quarter, and increased in the euro area as a whole. Banks consider that monetary policy measures continued to contribute overall to an expansion of credit supply.

  • 20/10/2020
    Digital platforms: developments in their regulation and challenges in the financial arena (319 KB) Sergio Gorjón

    As has happened with other industries, large technology companies are increasingly present in the financial services sector. In addition to being providers of digital tools and solutions, these firms can also act as a distribution channel for goods and services that are traditionally produced by financial institutions. Further, in certain business niches, BigTech firms are also emerging as new, direct competitors to banks. Without prejudice to the potential benefits that this new situation could present, the significant disruptions caused to industries by the increasing consolidation of digital platforms’ activity have prompted European institutions to instigate various actions aimed at nurturing the fairest functioning of the markets in which they act. One of the most recent examples is the Regulation on promoting fairness and transparency for business users of online intermediation services, in addition to other competition and general regulatory initiatives for European digital services markets. Despite their broad scope, these measures enable some of the challenges that major digital actors pose to the financial sector to be addressed. However, they do not give a satisfactory response to another series of more specific and equally relevant matters, such as credit procyclicality, adverse selection and interdependencies. For these matters, more specific approaches are needed that help trace parallels between the activity of these platforms and of those that are already regulated, as a first step in the process to adapt the current regulatory and supervisory framework.

  • 13/10/2020
    Developments in the collective investment industry in Spain between 2008 and 2019 (336 KB) Laura Álvarez and Sergio Mayordomo

    This article shows that collective investment undertakings (CIUs) have grown notably in recent years, both in Spain and other European countries. These developments have come in step with greater sector concentration and a rising percentage of assets managed by entities registered abroad. In line with the evidence documented internationally, the investment portfolios of CIUs domiciled in Spain reflect an increase in risk-taking over the last few years, although the weight of lower credit quality fixed-income instruments is very low. There are very close links between the Spanish banking sector and CIUs. First, a very sizeable share of the assets of Spanish CIUs is managed by subsidiaries of Spanish deposit-taking institutions. Second, a very significant proportion of CIUs’ investment portfolios comprises financial assets issued by the banks themselves. Therefore, in-depth analysis of these interconnections is essential to assess the resilience of CIUs and that of the financial sector as a whole.

  • 28/09/2020
    Results of non-financial corporations to 2020 Q2 (472 KB) Álvaro Menéndez Pujadas and Maristela Mulino

    The Central Balance Sheet Data Office Quarterly Survey (CBQ) data for 2020 H1 show that the lockdown measures introduced in the context of the COVID-19 health crisis had a sharp adverse impact on activity, albeit with notable differences across the sample firms. This led to a sharp contraction in ordinary profit and profitability levels, resulting in a net loss in aggregate terms, something not seen in the CBQ since 2002. In addition, firms increased their indebtedness to fund larger operating deficits. The share of ordinary profit (Gross Operating Profit plus financial revenue) used for interest payments also rose slightly, reversing the downward trend of this ratio in recent years. The article includes a box that analyses firms’ liquidity needs in 2020 H1 as a result of the fall in activity, investment in real assets and debt repayments, and the financial deterioration recorded by these firms.

  • 23/09/2020
    Recent developments in financing and bank lending to the non-financial private sector (827 KB) Pana Alves, Roberto Blanco, Sergio Mayordomo, Fabián Arrizabalaga, Javier Delgado, Gabriel Jiménez, Eduardo Pérez Asenjo, Carlos Pérez Montes and Carlos Trucharte

    The COVID-19 pandemic has significantly altered the financing of the non-financial private sector. Financing of the self-employed and businesses has risen as a consequence of both the increase in demand, stemming from greater liquidity needs and from the perceived increase in refinancing risks, and the expansion of supply, stimulated by the introduction of public guarantee programmes and by the European Central Bank’s policies on the provision of liquidity to credit institutions. In contrast, new lending to individuals has fallen, largely as a consequence of the deterioration in the macroeconomic outlook, which has reduced the supply and demand for credit in this segment. The adverse impact of the COVID-19 crisis on the credit quality of deposit institutions’ portfolios is currently being mitigated by the measures taken by the economic authorities and the institutions themselves (in particular, the public guarantee programme and legislative and banking sector moratoria). However, non-performing loans have increased since the start of the pandemic, both in the case of lending to non-financial corporations and to households. The non-performing loans ratio of deposit institutions has, however, held steady since March, as the expansion in lending (the denominator of the ratio) has offset the increase in the volume of non-performing loans (the numerator).

  • 18/08/2020
    Recent developments in real estate investment trusts in Spain (349 KB) Víctor García-Vaquero and Irene Roibás

    Real estate investment trusts in Spain (SOCIMIs by their Spanish abbreviation) are instruments for investing in real estate assets which were regulated for the first time in Spain in 2009. They have grown rapidly in recent years to reach a relative size, approximated by their stock market capitalisation in terms of GDP, which is above the average for this type of companies in the euro area as a whole. In Spain this sector is highly concentrated, since a few, large vehicles exist alongside a sizeable group of small companies. SOCIMIs listed in regulated markets and those listed in alternative markets are notably different in terms of their size, balance sheet composition and ownership structure. The low exposure of Spanish SOCIMIs to the residential real estate segment, although it has risen in recent years, is worth noting, as is the high proportion of their capital owned by non-resident investors.

  • 13/08/2020
    Financial flows and balance sheets of households and non-financial corporations in 2019 (329 KB) Víctor García-Vaquero and Maristela Mulino

    The Financial Accounts of the Spanish Economy show that in 2019 households received, for the second consecutive year, positive net bank financing in a moderate amount, similar to that received in 2018, mainly owing to the increase in consumer and other lending. These developments were compatible with a further reduction in household bank debt (to 57% of GDP at year-end, down 2 percentage points (pp) from the level in 2018 and 29 pp from its peak in 2010). At the same time, the gross financial wealth of households increased – unlike in 2018 – mainly as a result of the rise in value of their financial portfolio, in line with the appreciation of stock market indices and fixed-income securities. As regards firms, the net flow of bank lending received from resident financial institutions was once again negative, in an amount slightly lower than that of the previous year, contributing to a drop in their debt ratio to 73% of GDP, down 2 pp from 2018 and 47 pp from the maximum levels recorded in mid-2010. Finally, in contrast to the previous year, non-financial corporations’ own funds increased, owing to both fund raising via this channel and, to a greater extent, the increase in the value of these instruments.

  • 22/07/2020
    The financial position of the workers most affected by the pandemic: an analysis drawing on the Spanish Survey of Household Finances (381 KB) Pilar Alvargonzález, Myroslav Pidkuyko and Ernesto Villanueva

    In the European economies, employment in the retail sector, in accommodation and food services and in the arts and recreation activities has been hit especially hard by the pandemic, so it is important to ascertain the financial resources that the individuals working in these sectors have available to withstand a possible fall in their income. This article draws on the Banco de España’s Survey of Household Finances (EFF, by its Spanish abbreviation) to characterise the financial position of the workers most affected by the present crisis. In 2017, these sectors employed approximately half of all women and the under-35s, two population groups with relatively lower labour income levels. In many cases, these workers lived in households that included higher income earners, which may partially mitigate the incidence of possible job losses. Even so, in 2017, 28% of those employed in the sectors affected lived in households whose financial assets amounted to less than one month’s income, and one in 12 lived in households for which debt repayments amounted to more than 40% of their pre-tax income. Among the workers in the sectors most affected by the pandemic, the financial position of those who were less able to work from home and those employed in the accommodation and food services and arts and recreation sectors was relatively more vulnerable.

  • 21/07/2020
    Consumption in Spain during the state of alert: an analysis based on payment card spending (369 KB) José González Mínguez, Alberto Urtasun and Miguel Pérez García de Mirasierra

    In recent years, information on the usage of cards as a means of payment has been increasingly used as an indicator of private consumption. The advantages of such information include its daily frequency and the short time lag from the moment of spending until it becomes available. This article uses this indicator to analyse Spanish household consumption since the state of alert was declared in mid-March and to explore the corresponding determinants. Indeed, the drop in consumption during the COVID-19 health crisis has been far greater than that suggested by the usual determinants, indicating that other factors could largely explain the developments observed. Included here are the greater uncertainty as to the course of the disease and its economic repercussions, and the restrictions on people’s movement and on various economic activities during the state of alert. Card payment data can be used to investigate the importance of social distancing measures when explaining the developments observed in consumption since mid-March. The article identifies that the indicators of payment card usage show a high correlation with the course of the restrictions on movement and activity. The information available also shows how in-person purchases were replaced by online shopping during lockdown.

  • 17/07/2020
    Market microstructure factors in the determination of oil prices (1 MB) Carlos González Pedraz and María Teresa González Pérez

    On 20 April 2020 the West Texas Intermediate (WTI) oil futures price for May delivery turned negative for the first time in history. Other crude prices also posted very low values and their volatility soared, far more than that on stock markets. This article analyses the differences between the spot and futures markets for crude, demonstrating the key role they played in the source and subsequent correction of this event, which affected above all WTI contracts more than Brent. The article also highlights the increasingly significant presence of oil exchange-traded funds (ETFs) and their growing use as a retail investment instrument.

  • 14/07/2020
    Bank Lending Survey in Spain. June 2020 (413 KB) Álvaro Menéndez Pujadas

    The latest results of the Bank Lending Survey are very much marked by the impact that the COVID 19 pandemic has had on economic activity and, in consequence, on the credit market. Thus, during 2020 Q2, the credit supply to enterprises eased in Spain, highly influenced by the establishment of the government-backed ICO COVID 19 credit line. In the euro area, the credit supply to enterprises presented little change, in contrast to the significant tightening recorded during the previous financial crisis, owing both to the impact of the tax and economic policy measures adopted and to banks’ stronger capital positions. Both in Spain and the euro area, credit standards and terms and conditions for lending to households tightened, largely as a result of the increase in perceived risk and the deterioration of the economic outlook overall. As regards credit demand, loan applications by enterprises rose sharply both in Spain and the euro area, on account of the increase in their liquidity needs primarily to fund working capital. By contrast, households’ demand fell markedly, against a backdrop of growing economic uncertainty.

  • 09/07/2020
    Results of non-financial corporations in 2020 Q1 (471 KB) Álvaro Menéndez and Maristela Mulino

    The data from the Central Balance Sheet Data Office Quarterly Survey (CBQ) for 2020 Q1 show that the lockdown measures introduced in the context of the COVID-19 health crisis had a sharp adverse impact on the activity of the sample firms in the first quarter of the year. This led to a sharp contraction in ordinary profit and profitability levels, even reducing final net profit to a negative aggregate value, something that had not happened in the CBQ since 2002. In addition, the need to cover operating deficits contributed to a rise in these firms’ debt, and the share of ordinary profit (gross operating profit plus financial revenue) used for interest payments also rose slightly, reversing the downward trend of this ratio in recent years. The article includes a box that analyses firms’ liquidity needs in 2020 Q1 (as a result of the fall in activity, investment in real assets and debt repayments) and the financial deterioration recorded by these firms.

  • 02/06/2020
    The Balance of Payments and International Investment Position of Spain in 2019 (608 KB) Pana Alves, Esther López, César Martín and Irene Roibás

    According to the balance of payments statistics, Spain’s net lending stood at 2.3% as a percentage of GDP in 2019, slightly down on the prior year, against a backdrop of continued, albeit slowing, economic growth. Developments in net lending are explained by the reduction in the capital account surplus, resulting from the decrease in funds from the EU, stagnation in tourism receipts as a percentage of GDP and the widening of the deficit on non-energy goods, which offset the improvement in the energy balance prompted by the decline in oil prices. There has been an abrupt change in the outlook for the economy’s external balance as a result of the COVID-19 health crisis, with major uncertainty in the near future about the scale (and even sign) of its effects on this balance, against a backdrop of a drastic reduction in the foreign goods and services trade. For the time being, the information on the balance of payments relating to March shows a net borrowing position, for the first time in that month since 2012, associated with the sharp fall in tourism receipts caused by the measures to restrict movement adopted in Spain and in source countries. Future developments in inbound tourism, in particular, will depend greatly on how quickly restrictions on movement are lifted. This, in turn, hinges both on how the pandemic continues to unfold and on risk perception, which could lead potential tourists to voluntarily adopt social distancing measures. In 2019, the negative net international investment position of the Spanish economy decreased for the fifth year running, to stand at 74% of GDP, its lowest level since 2006. These developments, which represented the biggest fall in the last seven years, were underpinned by the nation’s net lending position, the positive amount of valuation effects and GDP growth. In terms of financial flows, excluding the Banco de España, the surplus balance of financial transactions of the Spanish economy was lower than in 2018, influenced by the rise in purchases of general government debt by international investors, which was only partially offset by the fall in foreign direct investment inflows. For the first time since 2014, the financial account of the Banco de España showed a surplus, affected by certain changes in the implementation of the ECB’s monetary policy.

  • 28/04/2020
    April 2020 Bank Lending Survey in Spain (573 KB) Álvaro Menéndez Pujadas

    According to the Bank Lending Survey, in 2020 Q1 credit supply contracted slightly in both Spain and the euro area, affecting practically all the segments analysed. Demand for loans continued to fall in Spain across the board, although firms’ demand fell at a slower rate than in the prior quarter. In the euro area as a whole, firms’ demand for funds surged, while that of households slowed. Banks expect the COVID-19 pandemic to have a greater impact in 2020 Q2, especially in the case of demand for financing. For instance, they anticipate an upsurge in firms’ demand for loans between April and June, likely driven by their high liquidity needs. Should these expectations materialise, it would be the largest increase in demand recorded in this segment by the survey since it began in 2003. Conversely, amid growing economic uncertainty financial institutions foresee a slump in demand for loans from households. Furthermore, these intermediaries expect to ease credit standards for loans to firms during those months, foreseeably on account of the State guarantee schemes launched in several countries. According to the respondents, the measures adopted by the ECB (expanded asset purchase programme, negative deposit facility rate and TLTRO III) continued to help relax the credit supply terms and conditions and to contribute to a rise in lending volumes.

  • 23/03/2020
    Results of non-financial corporations to 2019 Q4. Preliminary year-end data (480 KB) Álvaro Menéndez Pujadas and Maristela Mulino

    According to the Central Balance Sheet Data Office Quarterly Survey, non-financial corporations’ activity lost momentum in 2019, resulting in a slowdown in job creation. However, the high inflow of dividends contributed to an increase in ordinary profit and, as a result, average levels of return on ordinary activities also grew. In addition, financing costs continued to decline, allowing the spread between the return on investment and this indicator to widen again. Extraordinary costs and revenue had an adverse impact on net profit, triggering a notable decline. Average debt ratios, expressed as both a percentage of assets and as a percentage of ordinary profit, continued to fall in 2019. The share of profits used to service debt also continued to decline and stands at a record low. The article contains a box analysing the recent developments in trade finance and the average supplier-payment and customer-collection periods.

  • 20/02/2020
    Recent developments in financing and bank lending to the non-financial private sector 2019 H2 (568 KB) Pana Alves, Fabián Arrizabalaga, Javier Delgado and Alejandro Ferrer

    In the final stretch of 2019, the funds raised by households and non-financial corporations grew at very moderate rates, somewhat below those recorded in the first half of the year. This occurred against a setting of weak demand for funds, in which credit standards for bank loans had tightened slightly, although the cost of credit declined again, in keeping with the more accommodative monetary policy stance. Deposit institutions’ loan portfolios continued to contract, albeit at a more moderate pace, while their average quality improved, with further reductions in the NPL ratio and in foreclosed assets.

  • 18/02/2020
    Impact of new technologies on financial inclusion (363 KB) Esther Barruetabeña

    Advances in new technologies give millions of people who experience financial exclusion globally the opportunity to access and use financial services. This article describes the main benefits of financial innovation, particularly in emerging economies. It also identifies the main challenges associated with financial innovation, including the potential effects of digitalisation on financial exclusion, and possible ways to address these.

  • 21/01/2020
    January 2020 Bank lending survey in Spain (547 KB) Álvaro Menéndez Pujadas

    According to the Bank Lending Survey, during 2019 Q4, credit standards tightened slightly for all categories of lending in Spain, whereas this only affected consumer credit and other lending to households in the euro area. In this segment, the general terms and conditions on new lending eased, both in Spain and in the euro area as a whole. Furthermore, in Spain, the terms and conditions on loans to households for house purchase tightened slightly. Demand for all types of credit in Spain decreased, whereas in the euro area as a whole loan applications from enterprises declined and those from households increased. According to the responding banks, regulatory and supervisory actions on capital, leverage and liquidity had a negligible impact on credit supply in Spain in the second half of 2019, whereas they prompted a slight tightening in the euro area. The NPL ratio contributed to a tightening of credit standards (in consumer credit in Spain and in the other two segments in the euro area). Lastly, as for the ECB’s TLTRO III (the third series of targeted longer-term refinancing operations), the banks’ participation in the September operation was limited and increased significantly in the December operation, as they were essentially attracted by the favourable conditions of this funding.

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