The bank sees as a “contradiction” pay to give loans with a negative Euribor
The employers of Spanish entities are lost in an environment of low and negative rates in certain values
The president of the Spanish Banking Association ( AEB ), José María Roldán , argues that for the next 24 months, the maintenance of low interest rates in the short term and the application of the latest regulatory developments affect the activity of the banks, as well as technological transformation and problems at the level of competition, among which has cited the ‘shadow banking’. Roldán has insisted on the need for banks to become strong and not allow this environment to prevent them from undertaking the necessary investments to deal with processes such as digitization, which will help them save costs.
He has predicted that the bank credit “will see positive figures” at the end of the year, as long as there is “no accident”, and has pointed out that at present in Spain all credit demand is being met, which is “the only way “for entities to improve their margins in an environment of interest rates close to zero.
Negative types, a “contradiction”
Roldán has warned that the negative entry of the Euribor at a daily rate can lead to a “contradiction” that would mean asking whether the bank should pay to lend money and charge for attracting products. “Paying someone for borrowing and charging for bringing resources is a contradiction,” he said.
The president of the AEB has warned that this situation “is not healthy, neither sustainable nor reasonable”, while he has warned of the pressure he would add to banks to improve their margins. Roldán has limited the impact of a negative Euribor that may lead to charging for the mortgage before the spreads fixed in the mortgage contracts. “We still will not see widespread cases,” he said.
The president of the banking employers has advocated a legal reflection on the matter, because “it is not clear” if the bank will have to pay for lending if necessary, and has relied on a ‘normalization’ of interest rates, which has located in two or three years.
Roldán has argued that the contracts set interest for returning the term money. In this sense, he has defended linking mortgages to fixed rates , although he has warned that people would not pay 3% or 5% for their mortgage loan. He also indicated that it would “make sense” to link mortgages to references such as public debt, although he regretted that no more “more stable” rates had been used. “It’s a demand problem,” he insisted.
Higher capital requirement
During his speech at the Europa Press news breakfasts, Roldán pointed out that at a system level the capital requirements of the banks are increasing, which is causing the financial activity of the entities to move to other types of environments, and has put as an example the Capital Markerts Union.
“This is an example of how it is being tried that at the same time that you know that the banks are going to be more selective in the financing, to generate alternatives of financing in markets. It is a reflection that we can not ignore, “he said. In this regard, he recalled that regulators always say that there is no evidence that higher capital requirements lead to a decline in the supply of credit.
However, Roldán understands that higher capital requirements that put pressure on profitability will cause entities to focus on those business segments in which they have an advantage and abandon others where they have no possibility. At this point, the president of the banking employers has warned of the need to keep in mind the transition in this process. “Be careful not to press the banks so hard, that we will have financing problems in some countries in less than four years without having the capital market alternatives still in force,” he warned.
Good results from banking
In this context, Roldán believes that the results presented by Spanish entities at the end of 2015 have been “good enough” considering the low interest rates and the need to make specific provisions to clean up the balance sheets as a result of the crisis.
Thus, he wanted to compare the situation of Spanish banking with international banking and stressed that the national model allows more stable returns over time. “It is true that the improvement is very slow and it is not enough to reach the cost of capital, but when comparing Spain with other business models, its model is less volatile and more stable, where there are no negative surprises, unlike other international banks, “he said.