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The Banks Get Ready for a Rebound in Defaulted Payments with Reserves Amounting to €11 Billion

Spain's six largest banks recognised provisions amounting to nearly 11 billion euros during the first half of 2020 to cover the increase in defaulted payments with liquidity lines from the ICO and mortgage moratoriums.

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After publishing the conclusions of its stress tests last week, the European Central Bank (ECB) has calculated its estimates and has revealed that the various State-backed guarantee programs launched to boost credit during the pandemic crisis will translate into a negative impact of around 21 billion euros in the most likely scenario. Nevertheless, that figure could increase to 42 billion euros in the event that the most negative hypotheses made by the central bank come true.

As a result, Santander, Bankia, Sabadell, BBVA, Bankinter and Caixabank are preparing for this contingency by recognising significant provisions – in total, the recognised provisions amounting to just over 11 billion, according to the results presented at half-year – to cover an increase in late payments, which may occur during the second half of this year and the course of next. And this despite the fact that the Bank of Spain reported in June that bank delinquencies had fallen in April to 4.74% and that credit was recovering.

Read the full article in Spanish.

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