Spanish bank borrowings from ECB fall for the first time in a year

Spanish banks’ dependence on the European Central Bank (ECB) eased for the first time in a year in September as the narrowing of Spain’s risk premium of late allowed some lenders to return to the wholesale funding markets.

According to figures released Thursday by the ECB, the Spanish banking system’s net average borrowings amounted to 378.200 billion euros from the European supervisor as of the end of last month, down 10 billion from August’s record levels.

However, the Spanish banking system still accounted for 43 percent of total euro-zone lenders’ borrowings from the ECB, when Spain’s weighting in the Eurosystem in terms of assets is only 12 percent. It accounted for 56 percent of all short-term borrowings.

A lack of investor confidence in Spain has seen flight of capital from the country amounting to 331.224 billion euros over the past year, almost a third of annual GDP.

The ECB’s decision to renew bond purchases in the secondary market has taken some of the pressure off Spain’s sovereign debt in the past few months with the risk premium dropping by some 200 basis points from record levels in July of well over 600 basis points. That allowed leading banks Santander and BBVA to capture 5.5 billion euros of late.

However, Standard & Poor’s decision on Wednesday to cut Spain’s sovereign rating to just one grade above junk status will led to downgrades for the banks, further complicating their access to the wholesale markets.