*
Market turmoil, inflation may require banks to raise
provisions
*
Cenbank says banks must have diverse, credible funding
sources
*
Spanish banks' liquidity to be stable despite ECB
normalisation
*
Cenbank has not seen any extraordinary deposit outflows in
Spain
*
Spanish banks have exposure to Credit Suisse of up to 400
mlns
(Adds details, quotes)
By Jesús Aguado
MADRID, March 28 (Reuters) - Uncertainty triggered by
the global banking sector turmoil may generate a persistent
increase in funding costs for Spanish lenders and require a
thorough assessment of sources of funding and liquidity, senior
Bank of Spain officials said.
Presenting the central bank's supervisory report, Bank of
Spain Governor Pablo Hernandez de Cos said that the impact from
high inflation on the disposable income of households and firms
"may adversely affect their payment ability."
"This, in turn, may force (Spanish) banks to raise the
required loan loss provisions, although the macroeconomic
deterioration has not been reflected so far in terms of credit
quality," de Cos said, adding that bad loan ratios declined
gently throughout 2022, despite the end of loan moratoriums.
Non-performing loans stood at nearly record lows of 3.56% in
January, far below the all time-high of 13.6% in December 2013.
The financial authority has not seen any extraordinary
deposit outflows, its director general for supervision, Mercedes
Olano told the media on Tuesday, adding that banks have just
been channelling deposits into funds for some time.
Deputy Governor Margarita Delgado also said that amid a
tighter financing conditions following a period of abundant,
cheap liquidity, banks should assess liquidity risks and have
diverse, credible and plan-based funding sources to allow them
to "adapt flexibly to the changing environment."
She added that recent monetary policy measures such as
reduced funding via ECB's TLTROs III loans, would mop up the
unusually high volumes of high-quality liquid assets.
"Moreover, in the euro area as a whole, the decline in
liquidity could increase competition for funds and thus make
market conditions for obtaining funding less favourable," said
Delgado, who also sits on the ECB supervisory board.
In its report, the Bank of Spain said it expected Spanish
lenders to maintain comfortable excess liquidity positions.
As of February, Spanish banks' liquidity coverage ratio stood on
average at 175% among the significant lenders, well above the
global average of 140%, according to the Basel Committee on
Banking Supervision.
Olano said that Spanish banks' exposure to Credit Suisse stood at between 300 million euros ($325.23 million)and
400 million euros.
($1 = 0.9224 euros)
(Reporting by Jesús Aguado and Emma Pinedo, editing by Andrei
Khalip, Chizu Nomiyama and Tomasz Janowski)
