February 26, 2021

A European deposit guarantee fund would ensure financial stability


Madrid

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«The approval of a fully mutualized European deposit guarantee fund would make a decisive contribution to ensure financial stability in the euro area and avoid problems of financial fragmentation, both in the short and medium term, ”says the Governor of the Bank of Spain, Pablo Hernández de Cos, in the KPMG Outlook Spain 2021 report.

In addition, it highlights that ” improvements experienced over the last decade in balance sheet quality and solvency levels They placed the Spanish banking sector in a better position to absorb the current crisis. The effect of the profound international financial reform and the sector restructuring process implemented in the last decade in Spain, together with the different economic policy measures adopted during this crisis, are helping to mitigate and manage the risks generated by it.

And it underlines that «the starting solvency ratio of Spanish entities increased significantly in 2020 as a consequence of the reduction of risk-weighted assets and other measures adopted by the authorities, such as restrictions on the distribution of dividends, as well as the reduction in delinquency recorded in the year.

De Cos explains in this collaboration that “the deterioration in the results of the entities observed in 2020 was due, above all, to the anticipation of provisions for credit deterioration. This effort should be maintained in the future since the full impact of the crisis on the payment capacity of customers will be observed with a certain time lag. In any case, the final impact of the crisis will depend on its magnitude and duration and on the effectiveness of the measures to mitigate its effects on families and businesses. The authorities will have to continue to exercise close surveillance over the entities and we will have to continue adopting measures to mitigate risks and, of course, be ready to give an adequate response if they materialize. Furthermore, this response must be European, given the commitment to the Banking Union.

Finally, he says that «all this will allow banks continue to act as a mitigating factor -And not amplifier- of the economic effects of the pandemic. However, after the crisis, the Spanish and European banking sector will have to face low profitability by deepening efficiency gains, reducing costs and using new technologies more intensively ”.

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