The improvements in the quality of the Spanish banking sector’s balance sheet and in its solvency levels in the last ten years have also clearly put it in a better position to absorb this crisis and to continue to provide the financing needed by the economy. The risks to the sector’s financial stability have been mitigated by the various economic policy measures adopted. Indeed, developments in credit, as I mentioned earlier, have differentiated this crisis from other episodes in the past. At the aggregate level, the volume of new lending and the outstanding balance of deposit institutions’ loans to the real economy have increased. This represents a notable change in trend compared with developments in bank lending in Spain since the last financial crisis. On data to 30 July 2020, total bank credit to non-financial corporations and households grew at a year-on-year rate of 2.4%, compared with the decline of 0.3% recorded until February 2020. This change in trend is largely attributable to credit to non-financial corporations which, as I said earlier, quickened substantially following the outbreak of the pandemic. Most of the financing obtained by firms has been used to shore up their liquidity buffers to meet future borrowing needs. In fact, the growth rate of firms’ bank deposits increased from slightly below 4% in February to 13% in June. By contrast, lending to households fell at a rate of 1.8% in June, whereas it was virtually flat in February.
Drawing on available estimates, the median of this indicator for the corporate sector as a whole is expected to fall from 3% pre-COVID-19 to virtually zero in 2020, in any of the macroeconomic scenarios considered by the Banco de España. Large firms are generally expected to suffer less pronounced falls in profitability. In any event, the operating deficit generated by many firms would lead to a deterioration of their financial position, resulting in lower own funds and higher debt to finance their liquidity needs. Thus, in the aforementioned early recovery scenario, the financial position of 55% of firms (with a weight of 51% in employment terms) would worsen in 2020, while in the more adverse scenario, this proportion would rise to 58%. However, despite this strong negative impact, around 40% of firms would continue to generate an operating surplus and to make new investments without a worsening of their financial position. In short, a significant number of firms are very likely to emerge from this crisis with higher debt levels and a diminished demand outlook, at least for some time. In this respect, it is also necessary to review the debt relief, restructuring and insolvency processes for firms, 5  with the aim of establishing pre-emptive, swift and simplified administrative procedures enabling them to pursue their business activity while they are still viable.