Previous posts speculated that rising ECB lending to banks during June reflected Spanish and Greek institutions borrowing to offset large-scale deposit outflows. Just-released Banco de España (BdE) balance sheet figures show that Spanish banks, in fact, accounted for the bulk of the increase.
Total Eurosystem lending to banks rose by €81.1 billion or 5.9% between 1 June and the end of the month*. BdE, meanwhile, increased lending by €62.3 billion between 31 May and 30 June. Assuming that system-wide loans were unchanged between 31 May and 1 June, therefore, Spanish banks accounted for 77% of the total lending rise last month. The size of the Spanish increase suggests that funding was used to finance the government as well as cover deposit outflows.
BdE lending to banks has now risen by €288.7 billion since end-November 2011 (i.e. before the ECB’s three-year LTROs), equivalent to 27% of Spanish annual GDP. BdE’s TARGET2 liabilities to the rest of the Eurosystem have risen by €271.2 billion over the same period, standing at €408.4 billion on 30 June, equal to 38% of GDP.
Banca d’Italia balance sheet figures also released this week show a much smaller €8.5 billion increase in lending to banks in June, while TARGET2 liabilities were little changed, closing the month at €274.3 billion.
The Spanish and Italian figures imply that lending to banks by other Eurosystem members rose by only about €10 billion in June. This is a net result so could conceal higher borrowing by Greek banks; the suggestion, however, is that Greek deposit outflows were smaller than feared last month.
*This comprises “lending related to monetary policy operations” and “other claims”, under which the Greek and Irish “emergency liquidity assistance” (ELA) operations are recorded.