May 11, 2021

The CNMV warns of the risk of falling into “flashy” investments in a scenario of economic crisis


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The president of the National Securities Market Commission (CNMV), Rodrigo Buenaventura, has once again warned about the risk involved in investing in cryptocurrencies. During a conference organized by the General Council of Economists this Wednesday, Buenaventura admitted that there is currently “a breeding ground that allows messages of high profitability to spread more” among retail investors.

“We have a difficult economic situation with job losses and there is also greater access to technologies for ‘trading’. At the same time, interest rates are very low and there is a temptation to look for particularly profitable or attractive investments. This generates risks either because of questionable assets, due to risky decisions or directly due to scams, ”argued Buenaventura. To avoid falling into fraud or the aforementioned risk investments, the president of the regulator insisted on the need to “alert, advise and educate” citizens.

Beyond cryptocurrencies, Buenaventura focused most of his speech on highlighting the role of stock markets as an integral part of the financing mix that economic recovery requires. “Stock markets are one of the fundamental levers of economic recovery”, remarked the president of the CNMV, who went so far as to assure that “European funds are not enough” to get out of the current crisis: «Private investment is also required, so that companies do not throw out more debt. Bank financing is not enough either, “he said.. “This recovery, unlike others, requires not only that spending recovers its usual levels, but also very important investment levels,” he said.

In order to increase the attractiveness of the stock markets and avoid “the relocation of Spanish companies to other markets”, Buenaventura opted for the need to study the introduction of new formulas for IPOs such as the ‘SPAC‘(acquisition companies that function as vehicles to buy other companies and allow them to go to market). At the same time, the president of the CNMV warned that this route is not without risks, among which he cited the understanding of the scheme by investors, the possible conflicts of interest of the promoters or the transparency of the published information.

In this sense, he indicated that the CNMV has been analyzing this formula for months and developing supervisory criteria for when these ‘SPAC’ operations begin to reach the Spanish market imported from the United States.

“Outstanding resilience”

At the same time, Buenaventura praised the role of equity markets during the worst months of the pandemic and from strict confinement, when much of the economic activity was paralyzed. “Unlike the crisis of 2008, the stock markets have responded adequately because they have continued to set prices and offer liquidity even in times of greatest stress,” he stressed. For the president of the CNMV, this “outstanding resilience” has been motivated by the regulation applied after the previous crisis: “It is never regulated to anticipate the next crisis, but to react to the last one. The precautions of then have helped them to remain unscathed, “he considered.

Despite this, the president of the CNMV acknowledged that Europe’s stock markets are ‘thin and weak’ compared to the size of its economy. Along these lines, he recalled that European companies are financed much more with bank debt than with capital or fixed income issued in capital markets. He also pointed out that the proportion of bank loans in non-financial companies in the euro zone is close to 30% of the total liabilities of companies compared to 10% for US companies.

Within the Spanish market, the president of the CNMV explained that emissions amounting to 132,000 million nominal euros were registered in 2020, which represents an increase of 46% compared to last year. In the securities markets, issues amounted to 38, mainly capital increases worth 10,800 million, 10% more than in 2019.

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