The big bank asks for fewer obligations for the ecological transition and not having to act as "climate police"

There are multiple organizations and authorities that see banking as having a central role in the ecological transition. However, in recent times voices have been heard in the sector that try to discharge part of the responsibility that has been placed on its activity as a financier of the most polluting companies and industries. This Wednesday, the two largest Spanish banks and those with the most international business, Santander and BBVA, have referred to these obligations lamenting the increase in the level of regulatory demand and their position as "police" of the climate.

The CEOs of both banks, José Antonio Álvarez (Santander) and Onur Genç (BBVA), met at a forum on the sector at IESE. There, both recognized that the ecological transition is one of the challenges for the activity of banks in the coming years. The two entities have presented in the last year plans to reduce emissions in their banking activity. Not only directly but also indirectly by the industries that are financed. By 2030 these banks have committed to no longer financing coal. Investors and regulators have focused in recent years on these obligations.

"It's not comfortable for me to function as a policeman for everything, both with money laundering and with the weather, playing the bad guy," Álvarez said. It is not the first time that the bank has lamented this "climate police" position, since the president, Ana Botín, has already criticized these demands for the entities. "We are aligned with leading, but we need more clarity from the governments," said the chief executive of the largest Spanish bank at the time. Álvarez delved into this criticism on Wednesday by assuring that "he is not prepared in everything related to the weather, I do not know if my clients follow the appropriate processes or not." "I'm not worried about the big companies, which know what they have to do, but about the medium ones," she stressed.

For Álvarez, the problem for the banks is not "to stop financing coal", but the transition. "There is no clean enough alternative industrial process," he said.

Onur Genç, from BBVA, moved along a similar line. The bank's Turkish executive chaired by Carlos Torres acknowledged that banking is "a huge economic agent" and that "sustainability is a business opportunity." In fact, he estimated that every year, until 2050, between 7 and 10 billion euros of investment will be needed worldwide to achieve emission neutrality. "We are banks, it is what we do, take care of investments," he emphasized. "You are going to win and therefore you have to participate, be more demanding", he pointed out.

However, during his participation in the forum he slipped a criticism of the regulations and obligations for banks in this matter. Genç explained that it is the "business opportunity" itself that is going to move the activity of the banks towards more sustainable models and greater ecological transition. "We can guide, advise and accompany our clients," he explained. "It's not about rules, it's the business world itself, why shouldn't I want more business?" he wondered. "Why bind with rules?" he insisted.

Genç referred to a specific aspect. Supervisors such as the EBA, the community authority, have begun to give relevance to a coefficient to know the European banking portfolio known as the green asset ratio (GAR, in its acronym in English), which calculates the weight of the activity compatible with the European green taxonomy with respect to the banking business portfolio as a whole. "It should not be punished that you have financed brown in the past, it should matter the evolution and the new action," he stressed. "The GAR metric doesn't take that into account."

In recent months, the ECB and the EBA have been carrying out a stress test on European banks regarding the possible impact of the climate crisis on balance sheets and their adaptation to the ecological transition. Although the results will not be published individually, they will serve to know the situation of the sector. Both Santander and BBVA belong to a consortium of global banks known as the Net Zero Banking Alliance, which entails the commitment of the signatories to align their activity and loan portfolio with the Paris Agreement. However, a recent study showed that, despite the signing of that protocol, focused on coal, continued to finance oil and gas.

In addition, the ECB, in a report published in the autumn, pointed to Spanish banks as the most exposed in Europe to the effects of climate change. Specifically, the document argued that around 60% of the loans that Spanish banks have granted to companies are to companies that have a very high exposure to the potential catastrophes caused by this climate crisis. The organization extended this criticism to all the countries in the south of the continent.

It was not the only regulatory protest that was made by both banks in the same forum. Both recovered a prolonged battle that they maintain for the rules that banks support compared to those of fintech and large technology companies, who already have a presence in some businesses such as payments. "What worries me is unequal regulation," said Álvarez when asked about the competitiveness of the banking sector in Europe compared to other countries. "This is a free market, so everyone is welcome, if you are better, the market will reward you, but without doing it with the same rules, it is very harmful for us, it is a fundamental problem", assured Santander's 'number two' . "The opportunities exist and we have to be ready, but with equal ground for all," he said. Again, It is a message on which the bank has made a flag in recent years in the voice of Botín.

Genç, although more restrained, joined the criticism against what he understood to be "regulatory arbitration." "I am convinced that for the same activity, the regulation should be the same," said the Turkish executive. However, he acknowledged that fintechs have not ultimately had the impact on the sector as was anticipated. "Years ago he would have said that fintech today would be bigger than it really is," and defended that the investment capacity and experience that banks have can hardly be quickly achieved by these digital platforms. For this reason, he advocated "associating" with them because of their talent.

One of the supervisors of banking activity, the EBA, chaired by the Spaniard José Manuel Campa, participated in the same forum. The head of the European Banking Authority indirectly refuted the arguments put forward by the banks. Although he acknowledged that there is an international debate on "whether activities or entities should be regulated," he acknowledged that a bank is not the same as other companies. "The special regulation of the sector is based on the activity of taking deposits that the banks have," he pointed out as the reason that it has a high level of control. For this reason, he pointed out, "it is not true that the same activity carried out by different operators entails different risks."

Campa did acknowledge that there are activities where supervisors are concerned about the presence of large technology companies. One of them is precisely in the services they provide to banks. According to the head of the EBA, there is a high concentration in this business since there are few companies that provide these services to all banks, which limits the ability of entities to negotiate the conditions of this subcontracting and increases the risk for the sector. For this reason, he advanced, a new regulation is being prepared to control this situation.

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