Along with aggregated Euro area monetary data, the ECB also released the per country MFI balance sheets for July. In the case of Italy developments were rather mute. Categories such as loans to non-financial corporations and households, holdings of securities, private sector deposits and debt securities issued were either stable or increased a bit.

In the case of Spain though, the figures released were more worrying. Deposits to other euro area residents posted a large drop of €74.2bn. After correcting for repos, the net drop is still €60bn, or close to 4% in one month. If retail depositors start moving funds outside the country then the banking system financial situation will worsen pretty quickly. Central government deposits were down to €38.5bn from €42bn in June. It’s another sign that (especially given the bailouts of regional governments) the government’s buffer is running low and will not be able to cover any shortfalls when €20bn of bonds mature in October.

Holdings of securities other than securites also dropped significantly by €32.3bn. Although most of the drop was in the ‘Other Euro area residents’ category, general government also saw a drop of €9.4bn, a negative development since holdings decreased to February 2012 levels.

Loans to Other euro area residents were down by €30bn (-1.7%), driven by lower lending to non-financial corporations and other lending to households (mortgage loans were actually stable).

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