Spain | The banking channel of monetary policy

Summary

The main banking indicators for the first half of 2023 are now public, revealing a reduction in credit and deposits, but a significant rise in interest rates on loans compared to a very timid increase in interest rates on deposits.

Key points

• Key points:
• The situation is down to inflationary pressures, which forced the ECB to hike policy rates sharply to 4.0% in June, and switch to a more restrictive monetary policy.
• As a result, credit volumes —for both Households and Non-Financial Corporations — were on a downward path at the end of June.
• Meanwhile, deposit growth has been much stronger in the wake of the pandemic, although it has slowed somewhat from the second half of 2022 onward following the start of the interest rate hikes, and even recorded a slight decline in the last year.
• Last but not least, bank interest rates have increased significantly for lending products, but less so for deposit products, in a manner consistent with current market supply and demand dynamics.

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