Financial stability improves, public debt remains high

Spanish households and non-financial corporations have significantly strengthened their balance sheets, with debt and financial burden ratios remaining at historically low levels through the fourth quarter of 2025.

Aggregate financial vulnerability for households is also at a historical low, reflecting favorable income, employment, and wealth developments.

Corporate indebtedness continues its downward trend, and financial burdens are below the euro area average, despite some sectoral disparities in profitability.

In contrast, public finances, while having recovered from recent shocks since 2020, still face a high level of public debt.

The report highlights upward risks to public spending from factors like defense and demography, alongside an ongoing lack of clarity regarding fiscal consolidation plans.

This divergence between private and public sector financial health presents a key challenge for overall stability.

The Spanish banking sector continued to improve its profitability in 2025, with the CET1 ratio increasing by 0.5 percentage points, driven by capital accumulation.

Banks maintain limited direct exposure to regions like the Middle East and Asia, and to energy-intensive corporate sectors.

Credit growth accelerated in late 2025 and early 2026 for both households and firms, with continued improvement in credit quality.

While the non-bank financial sector in Spain is smaller than in the euro area, private credit has grown significantly.

However, US-domiciled lenders largely dominate this expanding market segment.