SPANISH and Greek banks have had to borrow hundreds of billions of euros from central banks to shore up their balance sheets as depositors have fled from the risky institutions, a top economist has warned.
Banks borrowed an additional €81.1bn (£64.3bn) from the Eurosystem in June, an increase of 5.9 per cent. Over the same period the Bank of Spain increased lending by €62.3bn.
“Assuming that system-wide loans were unchanged between 31 May and 1 June, Spanish banks accounted for 77 per cent of the total lending rise last month,” said Simon Ward from Henderson. “The size of the increase suggests funding was used to finance the government as well as cover deposit outflows.”
That means banks have increased borrowing from the Bank of Spain by €288.7bn since the end of November 2011, while its Target2 liabilities rose by €271.2bn to €408.4bn. Meanwhile figures from the Bank of Italy show it’s loans at €8.5bn in June.
“The Spanish and Italian figures imply that lending to banks by other Eurosystem members rose by only about €10bn in June,” said Ward.
“This is a net result so could conceal higher borrowing by Greek banks; the suggestion, however, is that Greek deposit outflows were smaller than feared last month.”