MADRID (Reuters) – The unfavorable result of lower interest rates on Spanish banks’ success must be restricted and at least partially balancedout by increasing loan volumes, the Bank of Spain stated on Tuesday.
Any down pressure on banks’ margins would be countered, at least in part, by a “more beneficial advancement of the volume of activity,” the bank stated in its semiannual monetary stability report.
Spanish banks benefited when interest rates increased following an inflation walking in 2022 and 2023 by increasing the rates they charged on loans, while restricting the rates they paid on deposits.
That tailwind is now reversing and European lendinginstitutions are having to adjust to a altering market environment as standard interest rates fall.