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Spanish non-financial corporations’ liquidity needs and solvency after the covid-19 shock

Author

Listed:
  • Roberto Blanco

    (Banco de España)

  • Sergio Mayordomo

    (Banco de España)

  • Álvaro Menéndez

    (Banco de España)

  • Maristela Mulino

    (Banco de España)

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.

Suggested Citation

  • Roberto Blanco & Sergio Mayordomo & Álvaro Menéndez & Maristela Mulino, 2020. "Spanish non-financial corporations’ liquidity needs and solvency after the covid-19 shock," Occasional Papers 2020, Banco de España.
    • Handle: RePEc:bde:opaper:2020e
    as

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    File URL: https://www.bde.es/f/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosOcasionales/20/Fich/do2020.pdf
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    Cited by:

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    2. Martin Guth & Christian Lipp & Claus Puhr & Martin Schneider, 2020. "Modeling the COVID-19 effects on the Austrian economy and banking system," Financial Stability Report, Oesterreichische Nationalbank (Austrian Central Bank), issue 40, pages 63-86.
    3. Carla Marques, 2022. "Modelling the financial situation of Portuguese firms using micro-data: a simulation for the COVID-19 pandemic," Working Papers o202203, Banco de Portugal, Economics and Research Department.
    4. Laura Auria & Markus Bingmer & Carlos Mateo Caicedo Graciano & Clémence Charavel & Sergio Gavilá & Alessandra Iannamorelli & Aviram Levy & Alfredo Maldonado & Florian Resch & Anna Maria Rossi & Step, 2021. "Overview of central banks’ in-house credit assessment systems in the euro area," Mercati, infrastrutture, sistemi di pagamento (Markets, Infrastructures, Payment Systems) 13, Bank of Italy, Directorate General for Markets and Payment System.

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    More about this item

    Keywords

    COVID-19; firms’ liquidity needs; credit; guarantees; insolvency risk;
    All these keywords.

    JEL classification:

    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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