Business · Markets · 2 hrs ago
Spanish Banks Rank Third in Europe for Sovereign Debt Exposure
Spanish banks now rank third among large EU banking systems for exposure to government debt, behind Portugal and Italy.
The measure compares sovereign debt holdings with banks’ highest-quality capital, and Spain’s ratio was close to 350% at the end of the first half of the year.
It was about 260% in 2019.
After the European Central Bank began raising interest rates in 2022, Santander, BBVA and Sabadell bought more government bonds; CaixaBank did not, because it already held a large amount inherited from Bankia.
The renewed concern is that financial trouble in a country could weaken banks that hold its debt, and the crisis in France has brought that risk back into focus.
DBRS says the risk to banks is manageable, citing less concentration in their home countries, stronger supervision and healthier balance sheets.
Other analysts warn that problems in France could spread to Italy, where public finances are weak and banks hold a larger share of sovereign debt.
Spanish banks rank third among the largest European Union banking systems for exposure to sovereign debt, behind Portugal and Italy, according to DBRS data reported by Expansión.
Their holdings approach 350% of their highest-quality capital, up from about 260% in 2019.
The figures cover sovereign debt generally, not only Spanish government bonds, and are measured against CET1 capital.
DBRS says the effects should be manageable, while other analysts quoted in the article warn that problems in France could spread to Italy and beyond.
- Who
- Spanish banks, alongside other European banking systems assessed by DBRS.
- What
- Spanish banks rank third among the largest EU countries for sovereign-debt exposure.
- When
- The figures are for the end of the first half; the article was published on 12 October 2026.
- Where
- Spain and other European Union countries.
- Why
- Banks increased sovereign-bond purchases after the European Central Bank began raising interest rates in 2022.
DBRS
Cautious analysts
Impact of sovereign-debt exposure
DBRS
DBRS expects the impact to be manageable, citing holdings at amortised cost, improved profit generation and stronger bank balance sheets.
Cautious analysts
Analysts warn that French problems could drag in Italy, where public finances are weak and banks have greater sovereign-debt exposure.
Spanish banks' sovereign-debt holdings were around 260% of CET1 capital.
The European Central Bank began raising official interest rates, making sovereign bonds more attractive to banks.
The data showed Spanish banks' sovereign-debt exposure approaching 350% of CET1 capital.
- Spain's ranking
- Third among the largest EU banking systems for sovereign-debt exposure
- Spanish banks' exposure
- Nearly 350% of CET1 capital
- Spanish banks' exposure in 2019
- Around 260% of CET1 capital
- EU average exposure
- 264% of CET1 capital
- European banks' sovereign debt holdings
- €4.54 trillion, 44% more than in December 2022
What people are saying
The traditional link between banks and sovereign issuers has become less direct, as European banks are less concentrated in their own countries and the supervisory framework is stronger than in previous periods of stress.
That said, we expect the impact to be manageable, given the high proportion of sovereign debt held at amortised cost, improved profit generation and the greater strength of their balance sheets.
Sources
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