Impact of restructuring plans on lending to non-financial corporations

Early this year saw the successful conclusion of the European Stability Mechanism’s financial assistance programme to help provide for the ongoing clean-up, restructuring and recapitalisation of those domestic credit institutions (CIs) that had been most adversely affected by the economic situation and by the tensions on financial markets, and to thus restore their financing capacity to normal and to build up their economic activity-supporting function. In exchange for their recapitalisation using public funds, these banks were required to undertake restructuring or resolution processes, obliging them to scale back their activity, thus limiting their capacity to finance new projects. The aim of this article is to analyse the impact that the adjustment plans of the banks recapitalised with public funds may have had on the overall supply of credit to non-financial corporations in Spain. In this connection, the source of the plans and the banks involved are first recalled. Next, the adjustment made by these banks in recent months – compared with that observed at other institutions not affected – is shown, and the weight of their loans to companies relative to total corporate credit extended by banks in Spain is assessed. Finally, a quantitative estimate is made of the effect that the adjustment plans may have had on the total aggregate supply of lending to corporations. This effect depends not only on the relative weight of the lending extended by the banks affected by the plans, but also on the possibilities that the companies concerned may have had to replace this lending with other loans granted by banks that have not been subject to such plans.