Impact of the Ukraine´s war on the Spanish and European financial sector
Speech by the Deputy Governor of the Banco de España, Margarita Delgado, that analyzes the impacts of Ukraine´s war on the financial industry and challenges, mainly focusing in Spain but also in Europe.
Key findings from the speech:
- The war will have an impact on the economic recovery that was underway after COVID, since indirect effects may be relevant. In this regard, the European Central Bank expects inflation in the euro zone of 5.1% by 2022 (7.1% in a severe scenario) and has lowered its growth forecasts by 0.5 percentage points, to 3.7% (which could drop to 2.3% in the severe scenario).
- Spanish banks continued to provide financing in 2021, mainly to households, with a strong growth in new residential mortgages, while loans to companies stabilized at 2020 levels, a year in which there was an important growth in this segment due to COVID-ICO public guarantee loans.
- The current uncertainty requires an additional dose of prudence in the management of credit portfolios, in terms of delinquency and appropriate coverage. Even more so now that the grace periods of the loans guaranteed by the ICO will begin to expire. 80.2% of these credits will begin to pay principal in the second quarter of the year, without bearing in mind the measures that the government may take due to the crisis of the war in Ukraine.
‑ Credit under special surveillance moderated its growth in 2H2021, but grew at double-digit rates, mainly in the sectors most affected by the pandemic (hotels, restaurants and transportation)
- Sustainability challenges: the EU's commitment to transforming the economy is clear and firm, and has been reinforced as a result of the Ukrainian crisis. Thus, financial institutions will have to continue preparing for adequate climate risk management (risk of transition to more sustainable models) and improving the quality of public disclosure to assess this risk.
- Digital Challenges: They have to do with the increase of:
‑ Digital operations: according to Eurostat, in 2021 in Spain, 65% of citizens used the internet to access online banking in the 3 months prior to the survey, compared to the 60% average for the euro zone. In 2016 these figures were 43% versus 49% in the euro zone.
‑ Required investments: It estimates that the volume of investments in technology of the ten main financial institutions in Spain has increased by almost 62%, going from 2,615 million euros in 2015 to 4,233 million euros at the end of 2020.
‑ Risk of cyberattacks, especially due to the conflict in Ukraine. In fact, the European Union Agency for Cybersecurity (ENISA) states that cyberattacks against critical sectors in Europe have doubled, pointing to the Russian crisis as one of the most likely causes.