Spain | Monetary policy and banking variables in 2024

Summary

The year 2023 ended with a declining banking sector marked by the contraction of credit and the slowdown in deposits due to the ECB's restrictive monetary policy. However, the easing of interest rates and this monetary policy in 2024 has improved credit performance and boosted growth of deposits

Key points

• Key points:
• In 2023, the ECB implemented an aggressive monetary policy to combat inflation, which pushed interest rates to record levels. This resulted in a contraction of credit and a slowdown in the growth of deposits.
• With inflation contained, the ECB lowered interest rates for the first time in June 2024. This change has allowed for more favorable performance for credit and deposits, with a moderate decline in interest rates on bank assets.
• Although credit continues to contract year-on-year, it has shown improvement compared to 2023. Mortgage lending has improved, and non-mortgage financing has accelerated in growth, driven by lower financing costs and increased household confidence.
• Deposits have accelerated in growth from the lows of 2023. In particular, deposits of non-financial corporations have shown a notable increase, benefiting from the end of the amortization process of variable rate loans.
• With inflation contained, the ECB is expected to continue easing its monetary policy in the coming months, which should prolong positive trends in credit.

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