Spain’s mortgage relief plans may mean higher provisions, Santander CEO says By Reuters

© Reuters. FILE PHOTO: The logo of Santander bank is seen outside a branch in Ronda, Spain, October 25, 2022. REUTERS/Jon Nazca

MADRID (Reuters) – Santander (BME:) said on Tuesday that Spain’s mortgage relief plans could lead to an increase in bad debt provisions and use up more capital reserves.

The Spanish government and the country’s banks on Monday reached an agreement in principle on mortgage relief measures, such as extending loan repayments, for more than one million vulnerable households and on help for middle-class families.

The planned measures are part of a wider package of support to help ease cost of living pressures.

“Some of the measures have an impact on the provisions, as it cannot be otherwise, as soon as an extension (is agreed) there are always elements that have an impact on the provisions,” the bank’s CEO Jose Antonio Alvarez told reporters on the sidelines of a financial event.

Alvarez said even small changes in how a potential mortgage refinancing or extension is done could have an impact on capital consumption related to the bank’s mortgage loans.

Alvarez also said Santander had still not signed off on the mortgage support agreement though it planned to do so. Some technical aspects were still being discussed such as how to classify clients’ loans, he said.

The CEO also said care must be taken to ensure the support measures do not make access to loans more difficult.

“Once a customer is classified as stage 3 (a loan considered as impaired) because of some of these technical aspects, clients have a problem in the future, which is that it is difficult for them to access credit,” Alvarez told reporters.