This is how Draghi’s magic works: more than 1,300 million Spanish SMEs irrigated, unblocking the credit

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The Bank of Spain estimates that small and medium-sized Spanish companies received an injection of 1.3 billion in the first months of activation of the corporate debt purchase program thanks to the fact that banks redirected credit to smaller companies, by reducing the demand for credit. the companies with access to the capital market. l Can the ECB be understood? Every time he speaks more times and his speeches are more complex

The concern of the president of the European Central Bank (ECB), Mario Draghi, during the worst years of the economic crisis was that the battery of measures taken (reduced rates, negative deposit rates, liquidity facilities, debt purchases ??) served so that the credit flowed to the real economy to get out of the recession.

The Italian banker is credited with almost magical powers, being able with only his words to reverse the delicate situation that the euro experienced, but behind his announcements there are measures that had never been taken by the ECB.

According to a report by the Bank of Spain, one of the initiatives that has brought liquidity back into the economy has been the specific program for the purchase of corporate debt from non-financial companies (CSPP), framed within of the general program of debt acquisition, focused on the purchase of sovereign debt.


The ECB announced the extension of the asset purchase program in March 2016 with the CSPP, with the clear objective of facilitating the granting of credit to the euro area economy and improving the terms of loans for households and businesses . And it was activated in June of that same year. The measure had several positive effects, but one of the main ones was that in the first three months of operation Spanish SMEs had more than 1,300 million credit that was previously denied by banks.

What happened to the companies to obtain financing?
The large Spanish companies with access to the market found it open and with low financing costs. The ECB was going to guarantee debt issues by buying it and adding it to its balance sheet. Until the end of 2017, it spent an average of 7,000 million monthly. The big companies found it much cheaper to finance themselves in the market than to go to the banks.

The Bank of Spain indicates that the profitability of the eligible bonds issued by Spanish non-financial corporations decreased by 44 basis points, equaling the interest that the market demanded directly from Spain. Spanish companies benefited from a considerable reduction in financial costs, while German, French and Italian companies with an investment grade credit rating fell by 28, 37 and 42 basis points, respectively. And all this occurred with the mere announcement.

For each percentage point that increased its balance of bonds issued between February and June 2016, issuing companies reduced their bank credit by 0.44%. The regulator calculates the balance of the credit liability fell by 4,000 million. Spanish banks redirected part of this amount to companies that did not have access to markets. The new credit funds redirected to large, medium and small companies increased by 3.3%, 1.8% and 0.8%, respectively. SMEs had 1.3 billion in three months.

The Bank of Spain notes that while the companies with access to the market took advantage to restructure their liabilities, amortize bank debt and refinance at lower rates, the new credit that came to the companies saw a significant increase in real investment, “until the point that 20% of the new investment in the quarter after the announcement of the CSPP can be attributed to this program. ”

The bonds of Spanish companies represented 11% of all purchases of the CSPP. In turn, of the total of 1,071 issues partially acquired under the CSPP, 100 of them have been issued by 17 Spanish companies.

The report of the banking supervisor indicates that the program of purchase of corporate debt was supported by the TLTRO-II, which facilitated the liquidity of the bank with very favorable conditions, both term and interest rates, in exchange for opening the concession of loans. “CSPP would have been reinforced by the simultaneous activation of this program and the TLTRO-II, which is one of the first pieces of evidence about the synergies between different unconventional measures of monetary policy,” the authors explain.

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