Balance between loans and receivables and deposits
The Bank actively monitors liquidity and liquidity forecasts, as well the actions to be taken in both business-as-usual situations and in exceptional circumstances arising due to internal causes or market behaviours. Structural liquidity risk is associated with the Bank’s ability to meet its payment obligations and fund its lending activity.
The instruments used to control liquidity risk include monitoring changes in the liquidity gap or map, such as information and specific analysis of balances resulting from trade transactions, wholesale maturities, interbank assets and liabilities and other funding sources. These analyses are performed both under normal market conditions and simulating different scenarios of liquidity needs that could arise from different business conditions or changes in market conditions.
In 2019, the customer funding gap (the difference between loans and receivables and customer deposits) was reduced by 2,451 million euros. The integration of EVO Banco in early June contributed 1,784 million euros of this decrease. The customer funding gap of the banking business in Spain decreased by 1,100 million euros thanks to strong growth in customer funds, which easily outstripped the liquidity requirements generated by the growth of loans and receivables. Conversely, the banking business in Portugal has a positive impact on the customer funding gap, with loans and receivables growing more than customer deposits by 434 million euros. As a result, 98.3% of loans and receivables were financed by customer deposits at the close of the year, compared to 93.8% a year earlier.
In wholesale funding, maturities were replaced with new issuances, maintaining a similar reliance on markets as in the previous year.
The improved liquidity position drove significant growth in the liquidity buffer, leaving the LCR (liquidity coverage ratio) well above both internal and regulatory limits. The LCR stood at 153.7% at the close of 2019, up from 144.2% at the close of 2018.