Today, Bank of Spain released its balance sheet data for July which point to continued growth in its lending to domestic credit institutions and target2 liabilities. More specifically:

Assets

MROs increased significantly, from €45bn to €69.34bn while LTROs also posted an increase of €12.8bn, from €320bn to €332.85bn. In total, lending to credit institutions is now €402.2bn.

Liabilities

The larger growth came from Target2 liabilities, which grew €42.81bn, to €414.62bn (more than 38.5% of GDP), pointing to a continued capital flight out of Spain with Target2 liabilities still being larger than total bank lending. Banknotes increased somewhat by €1.5bn to €71.6bn, while general government deposits decreased further to just €5.3bn, a figure that has not been registered during 2011-2012. The deposit facility decreased a bit in July as well to €26.64bn (a drop of €1.15bn) while the reserve accounts increased by only €0.5bn. The Spanish banks safety buffer is now only limited to the funds in the deposit facility. Net Other Assets kept their steady decline during 2012, registering at €79.84bn in July.

What is interesting is the fact that while the increase in Target2 liabilities was €42.8bn, new net lending from BdE was €37.2bn with entries such as government deposits and the deposit facility used to also fund the outflows. As stated before, this pattern of €40-50bn outflows per month is not sustainable and coupled with the difficult government financial situation points to some sort of development  in September.

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