The credit rating agency S&P does not believe that the new line of 3,000 million for the restructuring of the financial debt of companies foreseen in the aid package approved by the Government is disturbing for the Spanish banking sector. The agency has indicated in an analysis of the 11,000 million aid plan for SMEs and the self-employed that banks would have to assume 1,300 million euros in reductions in credits with ICO endorsement, assuming that the Government assumes 70% and the banks the 30th%.
“This is perfectly affordable for banks thanks to the provisions they made last year (8,000 million euros until September 2020), and the fact that they are likely to continue provisioning in 2021,” the agency states in its report.
The part of the package of 3,000 million euros that the Government has allocated to help companies restructure their existing loans guaranteed by the Official Credit Institute is the “least relevant part of the package,” according to those responsible for the report. However, they highlighted that this item of the plan received a lot of attention and sparked intense debate in the market in the weeks leading up to the launch of the package, due to concerns about the possible effects on the banking system.
Help companies survive
The agency has assured that the 11,000 million aid package for SMEs and the self-employed will help some companies survive the pandemic and will ultimately contain the credit losses of the banks. He has thus highlighted the change of priority of the Government, with the new package of 11,000 million euros for SMEs and the self-employed, guaranteeing that they remain afloat, in particular those whose activities continue to be disturbed by the measures of social confinement.
“A new approach was necessary, among other things because having a viable business sector with investment capacity is key to economic recovery,” the rating agency highlighted in a report. Although the agency has pointed out that it is “too early” to know how many small and medium-sized Spanish companies they will save from the collapse, the agency has highlighted that it is a welcome help for many companies that have more debt than they can pay in a way realistic due to declining income.
Most of these companies operate in sectors in which social restriction measures have had the greatest impact on income, such as tourism, hospitality or retail, as confirmed by a recent study by the Bank of Spain.
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