By Jesús Aguado
MADRID (Reuters) – Spanish banks have a loan exposure of about 20 billion euros ($21.80 billion) in areas worst-hit by floods, but will be able to absorb the shock, a Bank of Spain official said on Tuesday, adding climate risks were materialising faster than thought.
At least 217 people died and many are still unaccounted for in the worst flooding in decades in Spain.
“This is a shock that, for a financial system, a banking system such as the one in Spain, is something that can be absorbed,” Angel Estrada, the bank’s head of financial stability, said.
Estrada said that Spanish banks’ exposures to areas worst hit by floods in the regions of Valencia, Andalusia, Castile La Mancha and Catalonia would rise to around 13 billion euros in loans to households and around 7 billion euros to companies.
Presenting the central bank’s financial stability report, Estrada said these were the total exposures and would “not all materialise into losses”.
In total, the central bank has identified 23,000 companies with outstanding loans and 472,000 loan holders in those regions, of which 150,000 were mortgage contracts on which the banks are already offering loan moratoriums.
The head of financial stability said it was still too early to assess the economic impact of the floods though acknowledged that there had been a more “significant destruction of capital” compared to the COVID-19 pandemic.
He also said it was imperative to implement measures to help the worst affected cope with the situation and boost a fast economic recovery.
Estrada also noted that the floods in Spain had shown climate change was happening faster than previously expected and that banks should focus on measuring physical risks not just transition risks.
The European Central Bank has long complained that banks are not meeting its supervisory expectations on climate change and has begun issuing fine notices to lenders not meeting its long-defined expectations on disclosing climate risks.
“We thought that we had more time to deal with the physical risks, we had concentrated on the transition risks, but it is clear that it is accelerating,” Estrada said.
Transition risks measure risks to businesses and economies as the world shifts to a less carbon-intensive future.
($1 = 0.9175 euros)
(Reporting by Jesús Aguado, editing by Inti Landauro; Editing by Sharon Singleton)
