The governor of the Bank of Spain, Pablo Hernández de Cos, He did not comment on the negotiations for a possible merger of Unicaja with Liberbank, as both entities have recognized before the CNMV, but it did warn of the problems that these entities face. Asked on Wednesday morning by the mergers of medium-sized banks, he said: "The Bank of Spain does not manage the entities, they know the challenges they have because there are regulatory impositions in which there are no intermediate positions," he said at the 14th meeting. Banking organized by IESE with EY held in Madrid.
Hernández de Cos commented that the low profitability of the business prevents some entities from carrying the necessary investments required by the digital transformation of the business. In addition, he specifically quoted medium-sized banks saying that they may have problems to capture, at affordable prices, the financial assets required by the supervisor to strengthen their solvency.
The governor pointed out that "in the case of smaller Spanish entities, they tend to be financed mainly via capital and deposits and do not usually do so by appealing to the capital markets, which, in general, provide greater stability to the liability, without However, they entail a lower level of eligible liabilities and also cause a limited investor base and possible difficulties in accessing non-preferential debt markets. "
He added that "it is foreseeable that the issuances of this type of instruments have an impact on the cost of financing entities medianSpanish ace much larger than expected for the largest. This is due to the difficulties of access to the markets, previously mentioned, together with the higher liquidity premia expected by potential investors ".
Hernandez de Cos warned, among the different challenges of banking, that the irruption of fintech and bigtech (Google, Amazon, Facebook and Apple) are hitting their business taking customers with the incentive of the liability and run the risk that entities traditional services remain with little added value.
"Be more independent and rigorous"
The governor commented this morning that the institution "is focused on regaining its reputation by being more independent and rigorous, this is a commitment from the Bank of Spain." The supervisor has thus responded to a question about his reaction to the preliminary findings of the commission of investigation of the financial crisis, where he blames this institution, as well as the managers, of the banking debacle of 2012 in Spain. However, he clarified that he is waiting for the definitive conclusions of this commission.
In the speech, Hernández de Cos said that the main challenges are: to accelerate the sale of unproductive assets, to reinforce the capital and liabilities susceptible of being used to recapitalize the bank, "to reinforce the reputation of the sector avoiding the risk of inappropriate behavior, to face the challenge of profitability without a undue relaxation of credit granting standards, and progress in the use of new technologies, which although represent a great challenge for the sector, at the same time, represent an opportunity for entities that know how to take advantage of them ".
The governor recalled that customer complaints have "multiplied by six between 2014 and 2017. The banking reputation is very eroded"He spoke of" not inappropriate "attitudes in this field, denounced by the judicial resolutions, and asked to" react and correct these practices because there is much to be done ".
And he asked that they have "a very active attitude in the development of a strong culture oriented, not only to compliance with the rules of transparency with customers, but fundamentally to the knowledge and satisfaction of their interests. incentive mechanism that does not generate wrong or counterproductive incentives.They should incorporate the perspective of client protection to their risk appetite framework, becoming a fundamental element to be considered in their governance and decision-making processes, "he said.
No real estate bubble
The governor of the Bank of Spain denied that the market was again at the forefront of a real estate bubble, a question that he recognized has become recurrent. Hernández de Cos believes that "we are far from an excessive growth of credit", although he admitted that prices are rising "in an important way, although clearly below the levels of the crisis". In this regard, he recalled that if this happened, "now we would have tools to mitigate the effects" of a rise in prices.
In this regard, he recalled that after the financial crisis, has established "the cushion of systemic risk, the possibility of limiting excessive concentrations of risks, increase capital requirements or review the so-called assets weighted by risk in exposures to the real estate sector. they will allow supervisors to develop macroprudential policies that interact with microprudential policies and monetary policy, "said Cos.
The supervisor recalled that non-financial companies have reduced their debt and families by 40 percentage points, by 20 points. He also pointed out that construction only weighs 5% of GDP, "in line with the European average and far from the 12% that Spain had before the crisis".