The Bank of Spain continues with its messages of prudence for the financial sector in the face of the current high level of uncertainty. and mitigates the impact that the new banking tax will have on the institutions’ profits. “The collection of the temporary extraordinary tax on the results of the banking sector will amount in 2023 to an amount equal to 5% of the consolidated net result of 2022,” Governor Pablo Hernandez de Cos assured during his speech on Wednesday. IESE Banking Forum. , in Madrid.
The executive hopes to raise 3,000 million euros in two years with a floating rate. The entities have already paid the first advance payment, corresponding to them, for 50%, although the total amount for the year has already been recorded in the accounts. Financial groups have been opposing the tax since its inception and have already appealed it in court, although resolution is expected to take time. The tax includes applying a rate of 4.8% on the interest margin and net commission of the entities for their business in Spain. It should be noted that the 5% profit that the new tax will eat up (according to the observer) includes profit not only in Spain, but also globally.
In this context, with an increase in revenues and profits due to the unfavorable wind of the new monetary policy, the body headed by Hernandez de Casas has once again asked banks to share part of this improvement in numbers through thickening of provisions and improving solvency. Dedicate to improvement. The positive side, particularly from interest rate hikes by the European Central Bank (ECB), has yet to emerge, as seen in the skyrocketing interest margins in the last quarter. Call for caution as less flattering results are bound to come now. “We have yet to see some of the costs of these increases: it is possible that there will be additional upward adjustments in the cost of funding for banks and a deterioration in the quality of credit risk”, the governor said.
Regulatory change
Thus the Bank of Spain has intensified its warnings. But on the other hand, he has also praised the sector’s resilience in the face of disturbances experienced in the US and Switzerland. “Banks in the euro area and, in particular, the Spanish ones, have, as a whole, a high capacity for resistance and high solvency and liquidity conditions”, highlighted Hernández de Cos. A situation that has even appalled observers: “It has been the result of an internationally agreed regulatory reform over the last decade, which has been applied to all banking entities, regardless of size”, in the case of the European Union. , They said. In this way, it has tried to differentiate the situation in the region with the United States in the Old Continent, where various medium-sized entities have suffered in recent months.
Despite this, Europe is already analyzing the situation and is not ruling out regulatory changes. “It is necessary to conduct an in-depth analysis of recent events from a regulatory and supervisory point of view,” the governor stressed. In fact, he recalled that the Federal Reserve of the United States has already published an assessment of the reasons behind what happened on the other side of the Atlantic and believes that it is important that the EU’s analysis be followed to its conclusion. Have an open mind. Do: “They’re the ones that usually allow us to fine-tune the rules to adapt it to ever-changing circumstances,” he settled on. On the other hand, he has reiterated the importance of promoting the European Deposit Guarantee Fund.
Industry reputation
With regard to the resilience of the Spanish financial sector to the banking crisis, he also highlighted the importance of a business model focused more on the retail segment. “This strengthens the capacity to absorb adverse shocks to financing conditions in wholesale markets and allows for favorable financial growth for the sector, both in terms of increased profitability and improving balance sheet quality in the recent period” , underlined Hernandez de Cos.
During the Banking Forum, the reputation of the banking industry was also discussed at a table attended by Maria Dolores Dancosa, CEO of Bankinter. For the bank’s first executive, the sector’s image is hampered by a misdiagnosis of what happened in the 2008 crisis: “If the reputation of the customers’ image prevails over the identity with which it operates, then too much of the sector’s There will be prestige.
In the Great Recession, he has said, what happened to banks and savings banks got mixed up and lumped them all into one bag. “Banks continue to pay for the rescue of savings banks, which were disastrously managed by politicians,” Dankousa is impressed. Regarding the political context, in the middle of an election year, he pointed out that the area has become an easy target. “It is easy for politicians to blame everything on the banks. It seems to sell and banks are also mentioned with names and surnames ”, he is ugly. Nevertheless, he has also taken offense to the Ministry of Foreign Affairs and elaborated on some errors in this area that may be behind a part of his bad reputation: “We made mistakes, for example, with the sale of some products. The profiles were not correct.”
Internationalization
Likewise, the strengths of Spain’s financial sector are discussed, of which its internationalization stands out clearly. Santander and BBVA earn most of their profits overseas. The national market has increased its contribution, although business in other countries continues to account for most of the profits for both entities. Hector Grisi, CEO of Santander, in his speech at the Banking Forum, highlighted that the recipe for this success outside Spain is the ability to adapt.
“The cultural part of the company is the most difficult when you make an acquisition. When entering a new country, adapting to its culture is the most complicated. It is important to have a management team that understands that with a different culture Is a different company… Santander has done it very well. The only recipe is to know how to adapt”, Grisi insisted.
BBVA CEO Onur Genc also attended, warning that allegations of greenwashing (eco-laundering) should be done carefully and strictly so as not to discourage banks trying to help in the fight against climate change. “Some banks, particularly in the United States, are now choosing not to publish their commitments and their progress because they fear the negative impact of an attack,” Genk said.
In Spain, the bank invested €7,809 million in sustainable business during the first quarter of 2023, up 40% compared to the same period last year. “More than half of our permanent business was broadcast in Spain in the first quarter of the year, which is a record,” Genç said. Along the same lines, Alejandra Kindelon, president of the Spanish Banking Association (AEB), has expressed herself: “We have to give the right incentives and not focus on the static image of the issues we are financing”.
