Before the Covid-19 crisis, zero-bank-debt firms, especially risky ones, faced, due to their lack of credit history, more difficult access to bank loans than firms which previously had bank debt. These credit constraints were tightened by the Covid shock, irrespective of firms’ risk, arguably because of increased information asymmetries during a period of high macroeconomic uncertainty. Zero-bank-debt firms, even those which were safe and profitable, were also far more likely to leave the market during the pandemic than firms which previously had bank debt. However, those zero-bank-debt firms that did obtain new credit reduced their probability of exit.

After the outbreak of the COVID-19 pandemic, the economic authorities in many countries took steps to support firms’ liquidity and solvency. This article analyses the effects of two such measures implemented by the Spanish authorities: the public guarantee schemes and direct aid. The results show that public guarantees were essential in enabling many companies to cover their main liquidity needs. In particular, this scheme was especially useful for SMEs and for companies operating in the sectors hit more severely by the health crisis, although it did not significantly alleviate the increased funding needs of companies without prior credit relationships. For its part, direct aid appears to have contributed to a very moderate reduction in the business solvency problems generated by the COVID-19 crisis, since only a small part of the aid was allocated to those companies that needed solvency support.

We model the one-year ahead probability for default of Spanish non-financial corporations using data for the period 1996-2019. While most previous literature considers that a firm is in default if it files for bankruptcy, we define default as having non-performing loans during at least three months of a given year. This broader definition allows us to predict firms’ financial distress at an earlier stage that cannot generally be observed by researchers, before their financial conditions become too severe and they have to file for bankruptcy or engage in private workouts with their creditors. We estimate, by means of logistic regressions, both a general model that uses all the firms in the sample and six models for different size-sector combinations. The selected explanatory variables are five accounting ratios, which summarise firms’ creditworthiness, and the growth rate of aggregate credit to non-financial corporations, to take into account the role of credit availability in mitigating the risk of default. Finally, we carry out two applications of our prediction models: we construct credit rating transition matrices and evaluate a programme implemented by the Spanish government to provide direct aid to firms severely affected by the COVID-19 crisis.

Tras el estallido de la pandemia del COVID-19, las autoridades económicas en muchos países desplegaron medidas de apoyo a la liquidez y a la solvencia de las empresas. En este artículo se analizan los efectos que tuvieron dos medidas implementadas por las autoridades españolas: el programa de garantías públicas y las ayudas directas. Los resultados evidencian que las garantías públicas habrían sido fundamentales para permitir que muchas empresas en nuestro país pudieran cubrir sus mayores necesidades de liquidez. En particular, este instrumento habría resultado especialmente útil para las pymes y para las empresas que operaban en los sectores más golpeados por la crisis sanitaria, si bien no habría permitido aliviar de forma significativa las mayores necesidades de fondos que enfrentaron las compañías sin relaciones crediticias previas. Por su parte, las ayudas directas habrían contribuido a una reducción muy moderada de los problemas de solvencia empresarial generados por la crisis del COVID-19, pues solamente una pequeña parte de las ayudas fue destinada a aquellas compañías que necesitaban un apoyo a su solvencia.

English Abstract: This paper analyses the impact of the COVID-19 crisis on the financial vulnerability of the Spanish corporate sector. The simulations conducted show that the crisis significantly increased firms’ liquidity needs in 2020, although the measures adopted by national and international authorities eased access to credit under favourable conditions, which substantially mitigated the short-term liquidity risks. However, the sharp fall in profitability levels, coupled with debt growth, appears to have resulted in a marked increase in the proportion of vulnerable firms (i.e. those with negative equity or high debt levels), which would be more pronounced among SMEs and the sectors hardest hit by the pandemic. The projections for the period 2021-2023 indicate a gradual decline in these percentages, in keeping with the expected recovery in activity. The results also suggest that, as a result of the crisis, the proportion of firms at risk of becoming non-viable on account of persistent losses through to 2023 would rise by between 2 pp and 3 pp, while the proportion of those that will remain viable but struggle to repay their debts out of their expected future earnings (overindebted firms) would rise by between 3 pp and 4.7 pp. In addition, the simulations show that the unsustainable debt of firms that have become overindebted but remain viable would stand between €9 billion and €18.6 billion, depending on the scenario considered, with the bulk of this amount accounted for by SMEs. Spanish Abstract: En este documento se analiza el impacto de la crisis del COVID-19 sobre la vulnerabilidad financiera del sector corporativo espanol. Las simulaciones realizadas muestran que la crisis habria elevado significativamente las necesidades de liquidez de las empresas en 2020, s bien las medidas adoptadas por las autoridades nacionales e internacionales facilitaron el acceso al credito en condiciones favorables, lo que mitigo sustancialmente los riesgos de liquidez a corto plazo. Sin embargo, la fuerte caida de los niveles de rentabilidad, unida al crecimiento del endeudamiento, se habria traducido en un aumento notorio de la proporcion de companias vulnerables (es decir, aquellas con patrimonio neto negativo o con niveles de endeudamiento elevados), que habria sido mas acusado dentro de las pymes y en los sectores mas afectados por la pandemia. Las proyecciones para el periodo 2021-2023 anticipan una progresiva disminucion de estos porcentajes, en linea con la reactivacion prevista de la actividad. Los resultados tambien apuntan a que, como consecuencia de la crisis, se produciria un incremento de entre 2 puntos porcentuales (pp) y 3 pp de la proporcion de empresas con riesgo de ser inviables por tener perdidas continuadas hasta 2023, y de entre 3 pp y 4,7 pp en la de aquellas que seguirian siendo viables pero que tendrian dificultades para hacer frente a sus deudas con sus ingresos futuros esperados (empresas sobreendeudadas). Asimismo, las simulaciones realizadas muestran que la deuda no sostenible de las empresas que habrian pasado a encontrarse en esta ultima situacion se situaria entre los 9 mm y los 18,6 mm de euros, segun el escenario considerado, concentrandose la mayor parte de este importe en el segmento de las pymes.

The COVID-19 pandemic has significantly altered the financing of the non-financial private sector. Financing of the self-employed and businesses has risen as a consequence of both the increase in demand, stemming from greater liquidity needs and from the perceived increase in refinancing risks, and the expansion of supply, stimulated by the introduction of public guarantee programmes and by the European Central Bank’s policies on the provision of liquidity to credit institutions. In contrast, new lending to individuals has fallen, largely as a consequence of the deterioration in the macroeconomic outlook, which has reduced the supply and demand for credit in this segment. The adverse impact of the COVID-19 crisis on the credit quality of deposit institutions’ portfolios is currently being mitigated by the measures taken by the economic authorities and the institutions themselves (in particular, the public guarantee programme and legislative and banking sector moratoria). However, non-performing loans have increased since the start of the pandemic, both in the case of lending to non-financial corporations and to households. The non-performing loans ratio of deposit institutions has, however, held steady since March, as the expansion in lending (the denominator of the ratio) has offset the increase in the volume of non-performing loans (the numerator).

English abstract: The COVID-19 pandemic is exerting an unprecedented adverse impact on economic activity and, in particular, on firms’ income. In some cases this means firms’ income is insufficient to meet payments to which they have committed. This article presents the results of an exercise simulating Spanish non-financial corporations’ liquidity needs for the four quarters of this year. The needs derive both from the possible shortfalls caused by developments in operating activity, and from investments in fixed assets and debt repayments. According to the results, these liquidity needs, between April and December, might exceed €230 billion. It is estimated that, through the public guarantee programmes for lending to firms, almost three-quarters of this shortfall might be covered. To finance the remainder, companies could use their liquidity buffers and/or resort to new debt without public guarantee. In this respect, it should be borne in mind that, in recent months, firms with better access to credit have managed to raise a high volume of funds without resorting to public guarantees. Further, despite the unprecedented fall in business turnover, it is estimated that a significant percentage of companies (more than 40%) would be able to withstand this situation without undergoing a deterioration in their financial position. However, at the remaining companies, the fall-off in activity would have led to significant increases in their level of financial vulnerability, more sharply within the SME segment and especially among the firms in the sectors most affected by the pandemic, such as tourism and leisure, motor vehicles, and transport and storage Spanish abstract: La epidemia de Covid-19 esta teniendo un impacto negativo sin precedentes sobre la actividad economica y, en particular, sobre los ingresos de las empresas, provocando que en algunos casos estos sean insuficientes para hacer frente a los pagos comprometidos. En este documento se presentan los resultados de un ejercicio de simulacion de las necesidades de liquidez de las empresas no financieras espanolas, para los cuatro trimestres de este ano, derivadas tanto de los posibles deficits generados por la evolucion de la actividad de explotacion como de las inversiones en activos fijos y los pagos asociados a las amortizaciones de deuda. De acuerdo con los resultados, dichas necesidades de liquidez podrian superar los 230 mm de euros entre abril y diciembre. Se estima que, a traves de los programas de avales publicos para los creditos a las empresas, podrian cubrirse cerca de las tres cuartas partes de dicho deficit. Para financiar el resto, las empresas podrian utilizar sus colchones de liquidez o recurrir a nueva deuda sin avalar. En este sentido, hay que tener en cuenta que, durante los ultimos meses, las companias con un mejor acceso al credito han conseguido captar un volumen elevado de fondos sin recurrir a garantias publicas. Por otra parte, a pesar de la caida sin precedentes de la facturacion empresarial, se estima que un porcentaje no desdenable de empresas (por encima del 40?%) podria hacer frente a esta situacion sin experimentar un deterioro de su situacion patrimonial. No obstante, en el resto de las companias el retroceso de la actividad habria llevado a elevar significativamente los niveles de vulnerabilidad financiera, haciendolo con mayor intensidad dentro del segmento de las pymes y, especialmente, entre las empresas de los sectores mas afectados por la pandemia, como los de turismo y ocio, vehiculos de motor, y transporte y almacenamiento.

This article analyses changes in investment by foreigners in the residential real estate market in Spain between 2007 and 2019. Two indicators are used for this purpose: gross purchases by foreigners as a percentage of total transactions and net purchases (purchases less sales) relative to the housing stock. A distinction is made between resident foreigners and non-resident foreigners. Non-resident foreigners who invest in the Spanish real estate market mainly come from high-income European countries, while resident foreigner buyers are mostly from countries from which Spain receives immigration, such as Romania and Morocco. The article also shows how non-resident foreigners concentrated their purchases in the islands and in the Mediterranean coastal provinces, while residents distributed their purchases more evenly throughout Spain. Finally, there is no statistical evidence supporting the hypothesis that investment by non-resident foreigners has in itself contributed significantly to an increase in house prices. However, the high correlation between population growth and the increase in real estate prices suggests that the increase in the foreign population resident in certain provinces, particularly in the islands, appears to have contributed to raising house prices through its effect on the demand for property.

En la primera parte de este articulo se describe la evolucion de la rentabilidad, la solvencia y la liquidez de las sociedades no financieras espanolas a partir de la Central de Balances Integrada (CBI), que contiene informacion anual hasta 2019. Este analisis evidencia que, a finales del pasado ano, el sector corporativo se situaba en una posicion de relativa fortaleza para afrontar una perturbacion adversa, si bien ello era compatible con la existencia de segmentos con una situacion de mayor vulnerabilidad. Posteriormente, se analiza el impacto de la crisis del Covid-19 sobre la situacion financiera de las empresas, sobre la base de los datos de la Central de Balances Trimestral (CBT) correspondientes a los tres primeros trimestres de 2020, que incluyen un numero relativamente reducido de companias de un tamano generalmente elevado. La crisis del Covid-19 ha provocado descensos acusados de los excedentes ordinarios, del empleo y de los niveles de rentabilidad en esta muestra de empresas. Ademas, los resultados atipicos presentaron una evolucion muy negativa, lo que llevo a que, por primera vez en la CBT desde 2002, este agregado de empresas presentara un resultado neto final negativo. Tambien se observa en 2020 un deterioro de la posicion patrimonial de estas companias, pues las ratios medias de endeudamiento y de carga financiera evidenciaron un repunte, causado tanto por el aumento de la deuda empresarial como, en mayor medida, por el descenso de los resultados corrientes. Sin embargo, las companias elevaron sus colchones de liquidez como medida precautoria. El articulo incluye, ademas, dos recuadros que analizan el impacto de la crisis del Covid-19 sobre la rentabilidad y la solvencia del conjunto del sector empresarial en 2020, respectivamente, a partir de varias microsimulaciones. Los resultados del primero muestran que el retroceso de la rentabilidad habria sido especialmente intenso en el segmento de pymes y, sobre todo, en los sectores mas afectados por la crisis. Por su parte, el segundo recuadro evidencia que la crisis habria ocasionado un fuerte aumento de la presion financiera soportada por las empresas, asi como un deterioro, aunque mas moderado, de su solvencia.

A consequence of the outbreak of the pandemic triggered by COVID-19 is the unprecedented global economic recession that has led rating agencies to increase their credit rating downgrades. This process could continue in the coming months if the unfolding of the pandemic results in a significant worsening of the macroeconomic outlook. Although the financial system’s reliance on these ratings has decreased since the global financial crisis, they continue to play a significant role for regulatory purposes and when the investment policies of financial intermediaries and the operational framework of central banks are determined. As a result, these movements could have potentially adverse effects on monetary policy transmission, financial stability and the real economy. The article describes the challenges posed by rating downgrades in these three areas and considers possible measures to mitigate the adverse effects, taking into account the specific characteristics of the current crisis.

The first part of this article describes developments in the profitability, solvency and liquidity of Spanish non-financial corporations, drawing on the integrated CBSO database, which contains annual information up to 2019. This analysis evidences that, at end-2019, the corporate sector was in a relatively strong position to withstand an adverse shock. This was, however, compatible with the existence of segments that were in a more vulnerable position. It then analyses the impact of the COVID-19 crisis on the firms’ financial position, on the basis of Central Balance Sheet Data Office Quarterly Survey data for the first three quarters of 2020, which include a relatively small number of generally large firms. The COVID-19 crisis has triggered steep drops in ordinary earnings, employment and profitability levels in this sample of firms. In addition, extraordinary gains and losses have performed very negatively. This has led this group of firms to record a net loss in the Central Balance Sheet Data Office Quarterly Survey for the first time since 2002. The financial position of these firms has also deteriorated in 2020. The average debt ratios and the average debt burden ratio have risen, caused by both higher corporate debt and, to a greater degree, lower ordinary earnings. However, the firms have increased their liquidity buffers as a precautionary measure. The article also includes two boxes. Respectively, these analyse the impact of the COVID-19 crisis on the profitability and the solvency of the corporate sector in 2020, on the basis of various microsimulations. The findings of Box 1 show that the decline in profitability appears to have been particularly steep in the SME segment and, especially, in the sectors hardest hit by the crisis. Box 2 evidences that the crisis seems to have prompted a sharp rise in the financial pressure borne by the firms, in addition to undermining, albeit more moderately, their solvency.

In this paper we present the estimation results of a dynamic panel data model that explains the dynamic behaviour of default ratios in Spain for loans extended to the household sector. We estimate the models for two alternative definitions of default and for two different loan categories. The dataset consists of a panel of 50 provinces and covers the period 1984-2009. The results of the models show that the dynamic behaviour of the default ratios of loans extended to Spanish households can be reasonably well characterised with the lagged LHS variable, and the contemporaneous and the lagged values of credit growth, the unemployment rate and the interest debt burden. We find that the increase in the unemployment rate was the main driver of the sharp rise in default ratios between 2007 and 2009 in Spain and that the fall in interest rates since the end of 2008 contributed to moderating the upward path of default ratios in 2009. We also find that there is strong evidence of asymmetrical effects of unemployment ratios on default ratios, and differences between banks and savings banks in their sensitivity to the cycle

This paper analyses the behaviour of real interest rates in the Spanish economy over the last 15 years. Since inflation-indexed-bonds are not available, changes in implicit real interest rates are estimated using several approaches suggested by macroeconomic and financial theory. In particular, we employ equilibrium conditions of a representative agent under several specifications of preferences. Moreover, we exploit no-arbitrage conditions in securities markets. The evidence we report indicates that inflation uncertainty could account for a notable part of the observed decrease in nominal rates. Consequently, the actual real cost of financing might have decreased significantly less than what the course of ex-post real rates would suggest.

The main objective of this paper is to analyse the value of information contained in prices of options on the IBEX 35 index at the Spanish Stock Exchange Market. The forward looking information is extracted using implied risk-neutral density functions estimated by a mixture of two-lognormals and several alternative risk adjustments. Our results show that, between October 1996 and March 2000, we can reject the hypothesis that the risk-neutral densities provide accurate predictions of the distributions of future realisations of the IBEX 35 index at 4- and 8-week horizons. When forecasting through risk-adjusted densities the performance of this period is statistically improved and we no longer reject that hypothesis. We show that risk adjustments based on a power specification for the stochastic discount factor—which is the approach used so far in the literature that derives the objective density function from option prices- generates an excessive volatility of risk premia. We use alternative risk adjustments and find that the forecasting performance of the distribution improves slightly in some cases when risk aversion is allowed to be time-varying. Finally, from October 1996 to December 2004, the ex-ante risk premium perceived by investors and that are embedded in option prices is between 12 and 18% higher than the premium required to compensate the same investors for the realised volatility in stock market returns.

This paper analyses the contribution of interest rates to explain recent house price developments in Spain trying to reconcile different pieces of evidence. On the one hand, empirical evidence supports the view that interest rates are a key variable to explain house price developments. As a matter of fact, using simple asset pricing relations recent changes in house prices could be fully explained by movements in ex-post real interest rates. However, more refined asset pricing models show that the changes in the discount factor cannot fully explain the recent course of house prices in Spain. To resolve this puzzle we provide evidence that shows that the actual real cost of financing might have decreased significantly less than what the course of ex-post real rates would suggest.