December 3, 2020

The ECB opens to imitate the Spanish bad bank on a European scale




The Spanish bad bank can serve as inspiration for the European Central Bank for the future. This has been recognized by Edouard Fernandez Bollo, member of the ECB’s supervisory board, during his speech at the XXVII Meeting of the Financial Sector organized by ABC and Deloitte and sponsored by the Appraisal Society. “It is an idea that our president has already pointed to on occasions and that we believe may make sense especially because it greatly reduces financing costs.” Furthermore, Fernández Bollo has acknowledged that although credit losses have not manifested themselves in a generalized way in the European financial system and it is not possible to speak of a systemic problem, “all the measures that are taken from now on will be destined to try to avoid it ».

Regarding the governance of the entities, Fernández Bollo has admitted that on some occasions, the financial conditions of the credit have not sufficiently taken into account the cost of the price. “What we have seen is that on many occasions the banks continued to give loans with an income lower than their cost. This is not normal governance, “he said, and also pointed out that” adequate risk consideration is an essential factor in the governance of entities. “It also seems to us that the key elements of sustainability of the business model in the medium term need more important monitoring by the bank’s management and governance bodies,” added the member of the ECB.

José Manuel Campa, president of the European Banking Authority (EBA, for its acronym in English), has also spoken in a European key. The leader has pointed out that the elimination of stimuli to the economy, in all senses, must be carried out “progressively”, and always taking into account “macroeconomic developments.” A thesis also supported by the ECB and, in the Spanish case, by the Bank of Spain.

Regarding the merger process, without going to assess specific entities, Campa explained that “concentrations are one of the solutions to try to build a sustainable business model (in banking) over time and that allows it to obtain a return on its own resources to cover at least the capital costs. ‘ However, “concentration for the sake of concentration is not necessarily good. It must be done with a sense of improvement.

Asked about the ideal size of the bank, related to unions between entities, the EBA leader pointed out that there is no single viable model, but that “what will exist will be a sustainable model, and there will be optimal sizes for that model of deal”. It is based on community experience, where very different bank models and sizes converge.

And in this scheme of the financial sector also enter the new «players», the technological ones. The European Banking Authority monitors the evolution of innovation in the sector and identifies “gaps in regulation that lead to inappropriate situations.” It advocates for an equal playing field for those who act in the same branch of activity. “If the activity results in the same risks, it must be exposed to the same regulation,” he said.

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