August 3, 2020

“Banks could not survive without state protection”



The former governor of the Bank of Spain Miguel Ángel Fernández Ordóñez has predicted this Thursday that “the banks could not survive even a minute without the protection of the State”, and has defended a “reconversion” of the banking sector.

This afternoon, Fernández Ordóñez presented his new book in Barcelona, ​​entitled “Goodbye to Banks” (Taurus), in which he proposes a reform of the system that allows citizens access to public deposits, advocates for the liberalization of the sector and denounces the lack of competition between banks.

The economist has assured that, despite being the Governor of the Bank of Spain between 2006 and 2012, for some time he realized that the banking sector is the “most protected, intervened and regulated” sector of the entire Spanish economy, so if this state protection disappeared, the banks would not hold.

In this situation, he has proposed to withdraw these protections from banks “in moderation”, helping the sector “to transform itself”, but not to face its crises.

In the opinion of Fernández Ordóñez, who was also Secretary of State for the Economy, “the bad thing about banks is not that they give loans and payment services, but that these functions are carried out by entities that have the money from the entire economy.”

And it is that, in his opinion, it does not make sense that when companies have liquidity problems, the State can only give liquidity to banks.

For this reason, Fernández Ordóñez defends that citizens themselves can access public deposits from the central bank.

However, the former governor of the BdE has ensured that as long as a system like the current one is maintained, in which money is “fragile”, being in the hands of private banks, there is no other alternative than to inject money into them when they have problems, since that banking crises are “devastating”.

“On the other hand, if you have the other system, you do not have to save anyone,” added Fernández Ordóñez, who stressed that a transformation of the banking system would allow liberalization of banking activities such as loans or payment services and stimulate innovation.

And, with the exception of banks, the rest of the financial system is “totally liberalized”, like the stock market or hedge funds, Fernández Ordóñez explained.

During the event, the economist Antón Costas, who is president of the Cercle d’Economia Foundation, announced that this afternoon’s presentation is the last public event that hosted the headquarters of this entity until after Easter due to the evolution of the coronavirus. .

As for the effects that the Covid-19 is generating, Costas has described as “inevitable” that the health crisis derived from the new coronavirus is joined by another of an economic nature.

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