This sector benefits from an increased, comfortable level of liquidity and enjoys continuous profitability, with some financial institutions being also able to increase the amount of debt securities issued. Core and non-core capital instruments contributed to keep capital buffers at a safe level, and helped in reducing the aggregate amount of NPL in banks’ balance sheets.Namely, the NPL ratio for Spanish banks (including cross-borders activity) moved down to the EU average. Financial institutions further improved their business models, and increased their capability of supplying new loans to the economy.
Threats are represented by the high level of private and public debt, as well as by the high unemployment rate. Since the country is currently enjoying an expansion pahse, European authorities suggests the Spanish government to profit from this favourable situation to pursue fiscal consolidation and also to reduce the level of debt among all sectors.
It will be important that Spain puts in place policy efforts to ensure a durable growth path and achieve higher productivity growth. This includes steps to continue reducing unemployment, make the labour market more inclusive, improve the business environment and enhance the innovation capacity of the economy.