Spanish banks need to increase provisions amid economic slowdown, De Cos says

MADRID (Reuters) - Spanish banks will have to closely monitor risks and increase provisions to cover potential losses as an economic slowdown and energy price hikes are already hurting households and companies, Bank of Spain Governor Pablo Hernandez de Cos said on Tuesday.

De Cos said that a very complex macro-financial situation, marked by high inflation, tighter financing conditions and increased uncertainty, had already led to a slowdown in the Spanish economic activity "in the third quarter and a general downward revision of the growth outlook for the following quarters."

De Cos said that although the starting position of the banking sector was positive, "caution and careful monitoring of risks, which can quickly develop adversely and lead to new stress scenarios, is required."

In this scenario, he told lenders to be "very careful" with capital planning, their provisioning policy and eventually increase their provisions to cover potential losses.

In addition, inflation could also raise banks' operating costs, he said.

(Reporting by Jesús Aguado; additional reporting by Emma Pinedo; editing by Inti Landauro)