Some Spanish firms may struggle to repay state-backed loans -cenbank head

Some recipients of state-backed loans extended in Spain to help them weather the COVID-19 pandemic could fall behind on repayments in coming months as support measures are gradually withdrawn, the Bank of Spain governor said on Wednesday.

Last year, the government approved up to 100 billion euros in liquidity lines via the ICO state credit agency. Under the scheme, the state guarantees up to 80% of the loans that were channelled through banks to small and mid-sized companies and the self-employed, extending loan moratoria in some cases beyond two years.

Governor Pablo Hernandez De Cos said on Wednesday that 20% of the loans that were granted with a moratorium that has now expired had been put under special surveillance - that is, were considered subject to heightened credit risk, in June, while 9% were considered to be non-performing loans.

"This deterioration could moreover increase in the coming quarters as a significant number of the moratoria expired during the second quarter of 2021," De Cos said, adding however that they represented just a small percentage of the banks' portfolios.

De Cos also said those loans placed under special surveillance to companies had increased by 8 percentage points to 16%.

"It should be taken into account that a significant part of the ICO loans are currently in a grace period, which in the short term softens the extent of credit risk, but this could increase in the medium term."

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