The Bank of Spain warns that the overvaluation of large technology companies could generate a shock in the markets.

BarcelonaThe Bank of Spain has warned that the current overvaluation of major US technology companies could trigger sharp corrections in financial markets if profit expectations are not met, particularly in the development of artificial intelligence. The high concentration of investment in these companies, such as Nvidia, Microsoft, and Alphabet (Google's parent company), would increase the likelihood that any shocks related to their business could have systemic effects worldwide.

The Spanish central bank addresses this in its latest report. Financial Stability ReportThe report, published this Thursday, analyzes the economic and financial situation of the Spanish economy based on a set of indicators. The organization notes that the risk of abrupt corrections is "high" because, beyond the complex geopolitical environment and global fiscal vulnerabilities, the prices of risky financial assets "remain elevated." According to the entity, this could affect various market segments, including sovereign and corporate debt, as well as equities.

Regarding the Spanish banking sector, the Spanish central bank highlights a favorable trend in its return on equity (ROE), an indicator that stands at 14.6%, above the European requirements of between 9% and 11%. As for the non-banking financial sector, the institution says it could be affected by a "potentially abrupt correction" in the valuations of risky financial assets.

Considers limiting credit

Furthermore, the Bank of Spain reiterates that its macroprudential policy remains focused on strengthening the Spanish banking sector's available capital, with an increase in the countercyclical capital buffer requirement to 1%, and that it is closely monitoring current lending standards. In fact, it goes even further in this regard, stating that it is studying the development of a legal framework that would allow it to activate limits on lending if necessary. These limits are known as BBMs (Bank Limits for Banking and Credit Management). borrower-based measures(which stands for 'creditor-based measures'), seek to prevent over-indebtedness.

However, it notes that the low rate of housing construction does not suggest a systemic vulnerability associated with excessive construction activity; on the contrary, the restraint in new housing production has contributed to pushing prices upward. "The observed expansion of mortgage lending is contained in relation to GDP and the outstanding balance of bank loans, and has not translated into greater household debt," the report states, emphasizing that overall, vulnerabilities in the housing market are significantly lower than in the years prior to the housing crisis.