An analysis of loan default determinants: the Spanish case

The Spanish financial system is experiencing a very turbulent economic period in which loan defaults has lived an unprecedented increasing period, going from being less than 1% in 2004 to levels of above 13% in 2013. The impact of this, along with other circumstances, has led to the greatest financial restructuring ever made to date in Spain, with important macroeconomic and microeconomic consequences. This paper studies the determinants of delinquency (loan default) in Spanish credit institutions for the period of 2004-2011 and introduces new variables that have been disclosed as relevant in the current financial crisis as well as others non-previously considered internal variables, such as hedging derivatives (which are having an increasingly greater importance in accounts of Spanish credit institutions). Among the most prominent variables that have had a significant impact on the increase of delinquency are, among external variables, house prices, unemployment rates and the number of companies declaring bankruptcy and, among internal variables, property investment, customer credits over active, interest rate, participated companies and solvency rates. The analysis also shows significant differences in delinquency¿s behavior between savings banks and banks and between credit institutions that needed recapitalization and those that did not