14  In 2008, there were 100 branches per 100,000 inhabitants in Spain, compared with around 60 in France and Italy (data as at December 2020, which are the latest data available with comparable ECB information for the different European countries). 15  Second only to the Netherlands. 16  In Spain branch closures have affected municipalities of all sizes, albeit with slightly more cuts in larger ones (around 56% since 2008 for municipalities with more than 50,000 inhabitants) and fewer in smaller ones (around 40% for those with fewer than 5,000 inhabitants). The smaller municipalities are the only ones where the population declined in this period, in keeping with the demographic decline in Spain’s rural areas in recent decades. 9  Fifth, as regards the cost of bank funding, in the money markets secured interest rates stand at historically low levels. But wholesale market funding costs have risen, on expectations of a less accommodative monetary policy and the uncertainty prompted by the crisis in Ukraine. Indeed, expectations of interest rate rises have fed through to wholesale market interest rates on long-term bank debt (a measure of funding costs) more robustly than to the Overnight Index Swap (OIS) rate.17 Thus, banks’ credit risk spread has widened. There were mixed developments in the cost of new issuances in 2021 across instrument types and issuers. Banks stepped up their debt issuance to comply with prudential and resolution requirements, with issuances of Tier 2 instruments and contingent convertible bonds (CoCos).
Nevertheless, the impact is quite uneven across banks, owing to differences in factors such as the composition of loans to the private sector and of the sovereign loan portfolio, their international presence and the coverage of the ICO guarantee programme. In particular, in the portfolios of loans to NFCs and sole proprietors, the impact varies considerably according to firm size and economic sector.33 Loans to individuals are also important, as in business in Spain they account for more than half of the total loan portfolio.34  33  The larger differential impact on smaller firms reflects their lower capacity to absorb shocks, as their sources of revenue and financing are less diversified. The reasons for the cross-sector differences include the distinct impact the energy price increase has on each sector, and also the differences in the sectors’ sensitivity to the macroeconomic downturn and in their initial financial positions. 34  The expected loss rates in the mortgage portfolio remain limited, owing to the nature of the loans and their associated collateral, and the scenarios therefore envisage a smaller impact for this business.