The bank plans to place the 20,000 million euros in guarantees in a few weeks
The Government will monitor that entities do not take advantage of state guarantees to charge excess interest or market associated products
The banks received this Friday afternoon the final contract that will regulate the first 20,000 million in guarantees for loans provided by the ICO. The objective is to provide liquidity to meet the fixed expenses of the self-employed, SMEs and large companies and to prevent them from closing despite the fact that their income has plummeted due to Covid-19 . The bank has promised to exhaust the line “before April 30,” according to a financial director. Another believes it will last 15 days. “We serve clients from March 18,” he explains. The Government has put severe conditions so that the bank does not transfer the cost of the guarantee to the client.
Banks want to be part of the solution to this crisis and return, albeit morally, the aid received from citizens in the crash from 2008 to 2012. Banking managers insist on this idea, and Ana repeated it several times this Friday. Botín, Santander’s president, at the shareholders’ meeting.
The government has put pressure on the sector to comply and before the summer place loans with 100,000 million guarantees. According to financial sources, 100,000 million is the amount that the sector lends and refinances in just three months. The recipients are those affected by the fall of their businesses due to the pandemic or those who have suffered an ERTE. The State will cover late payment, if it reaches 80% for small clients, 60% for large clients.
The first step is the 20,000 million that will be definitively allocated on Monday. The amount, without detail, is already known by the entities. Half of what is received in each bank will go to companies, and the other 50% to freelancers and SMEs. SMEs are understood to be those with less than 250 workers and a turnover of less than 50 million or a balance of less than 43 million.
The ICO has distributed the money according to the market share of credit for non-households, according to a classification by the Bank of Spain. With this system, the Credit Institute wants each bank to focus on its customer base and not make aggressive or hasty offers to steal market share from the competition, according to bank sources that request anonymity. However, it will be common for companies to ask for guarantees from various banks because they are high amounts.
It has been established that the entity that on April 30 has not consumed its quota transfers it to others who demand it. The sector believes that this first line may last a few weeks, as Bankia sources point out: “Demand is very high.” The key is that since March 18 they have already been receiving requests from customers because it is retroactive until that date. “When we come out on Monday with the final contracts, it will be as if we have been working on this issue for three weeks,” says a senior executive.
Therefore, none of the banks consulted find it difficult to finish this line in April. The big three, Santander, CaixaBank and BBVA together have almost 45% of the share in companies. Their attitude will set the tone in the market, but they did not want to comment on the guarantees, beyond assuring their interest in financing their clients in difficulties.
Bankia will be responsible for placing some 1,500 million in guarantees. “After this first liquidity line, we calculate that new windows will most likely have to be enabled soon, taking into account the application estimates. So far we have managed more than 300,000 private clients and 113,000 companies to search for financing solutions ”, they point out in Sabadell. This entity will have guarantees for about 2,200 million. “There is a very high demand for requests from our clients, so the duration of the first 20,000 million will be very short,” point Bankinter sources. This entity will market credit with 1,000 million in guarantees.
The same is the opinion of Abanca, who have received a little more than 500 million in loan guarantees. A spokesman for the Galician entity believes that the guarantees will be consumed “in less than 15 days.” Kutxabank, which hopes to place loans backed by more than 400 million, also thinks that it will not take long. Ibercaja, which calculates an amount similar to that of its Basque competitor, considers that it will have more requests “from SMEs and the self-employed than from companies” because it is their target audience. Unicaja is pronounced in the same sense as these old boxes, with an expected amount of about 350 million in guarantees.
In the Cajamar cooperative they estimate that they will access about 600 million in this first line and about 3,000 million when they enable the 100,000 million. “This first game will most likely run out before the end of April,” says a spokesman.
Economy and the Bank of Spain monitor
The entities are very aware that the Bank of Spain and the Ministry of the Economy are closely monitoring its performance. The authorities do not want any scandal with clients, and that is why the ICO contract specifies that banks cannot charge clients for the cost of the guarantee. The Government has established that it will charge for guarantees between 0.20 points and 1.20 points, depending on the type of client.
Another aspect that the Government insists on is that banks cannot place their customers’ products, such as life insurance, cards or any other associated with credit, taking advantage of the guarantees.
Furthermore, the ICO has made it very clear that they cannot refinance delinquent loans from the past with the guarantees of the State. Refinancing must be for problems arising from the pandemic, not prior to this crisis. Financial sources pointed out that if a bank refinances bad loans from before Covid-19 and the client becomes delinquent, the ICO will review the file and will not endorse the operation. The contract specifies that the client cannot be guaranteed if he has been delinquent before March 17 or if he has been in bankruptcy. And it even goes one step further: the ICO does not want an old loan to be amortized in advance, and then give a new one under these State guarantees.
Government sources maintain that the use of these guarantees will force entities to maintain the working capital lines that were open to their clients until September 30. These sources also add that aggressive competition between banks will not be allowed and that the true objective of the Government is that liquidity reaches small and large companies guaranteeing employment.