The ECB points to the “overvaluation” of housing as a risk for banks

The vice president of the ECB, Luis de Guindos, defended this Monday that the financial system of the euro zone has managed to clear the short-term risks caused by the pandemic and has begun to improve profitability. However, he has warned that “vulnerabilities” have grown for the stability of the sector, among which he has highlighted the strong increase in the sale of homes and their “overvaluation”, which has raised the “concern” of supervisors.

One out of every three euros entered by the bank already comes from commissions

One out of every three euros entered by the bank already comes from commissions

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This has been stated by the former Minister of the Economy during the last economic crisis at a financial sector forum organized by KPMG and Expansión in Madrid, which brings together the CEOs of the main entities in the country. Guindos has spoken of the situation in the euro zone, due to its institutional position, avoiding evaluating specific data by country. He has warned in the opening speech of this appointment that “the most important increase in the sale of housing since 2005” is being seen and that this generates a “concern” about the effects it may have on the European financial sector.

Guindos has assured that there is a “significant relaxation of financing conditions” for the purchase of housing. This is causing an “overvaluation” that is getting worse in certain areas – which it has not identified – and has encouraged the various governments to take “macroprudential” measures to avoid the risks that this can generate in terms of stability. The vice president of the ECB has pointed to this relaxation of financing conditions, the increase in savings and the improvement of the household economy, are responsible for this increase in the sale of homes.

This overvaluation pointed out by the former minister is also transferred to other financial assets, which has ensured that, in the face of possible bad news in a context of so much “uncertainty”, it can cause abrupt changes in the valuation. Specifically, he pointed out that the financial sector in Europe is increasingly “less banked” due to the increase in the position of funds “which have a supervision that has nothing to do with that of the banking system.” For this reason, he has ensured that there may be a connection between problems for the funds that are transmitted to the bank.

Guindos also pointed out that, despite the progress made by European banks in profitability after the health crisis, “the level is lower than in other markets.” To this is added, points out the vice president of the ECB, that margins “are going to continue to be pushed down.” “There are structural factors: low efficiency, little diversification, low margin, or excess capacity,” he pointed out.

BBVA will use the app to grow in new markets

In the same forum inaugurated by De Guindos, the CEO of BBVA, Onur Genç, took the floor after him, pointing out that the mobile application is a “lower cost” alternative to grow in new markets. For this reason, it has opened the door to boost its presence in other countries through this platform, as it has already done in Italy. In this country, he has indicated that he hopes to end the year with 25,000 clients. Depending on the result of this experience, it will expand to other markets.

Regarding Spain, Genç has assured that “there is nothing new” in the relationship with Sabadell, a bank that it tried to acquire last year and about which speculation is growing again. The manager has argued that the “focus” is on growing the customer base in an “organic” way, but that the options to grow “inorganically” through acquisitions are being analyzed, both in Spain and in other markets. “We will always analyze the opportunities if they serve to increase value,” he said.

The bank announced a few weeks ago a takeover bid on the 50.1% that it does not own of its Turkish subsidiary, which received a significant drop in its value on the Stock Market, due to the doubts of the analysts with this operation. Genç has once again vindicated this decision to bet on the market, by ensuring that the Turkish market “offers high potential in the long term, despite the fact that there is uncertainty and vulnerabilities in the short term.”


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