The governor of the Bank of Spain, Pablo Hernández de Cos, considers that the current may be “a good time” to pay attention to the degree of concentration in the banking market. He made this assessment during his appearance before the Economy Commission of the Congress of Deputies, in response to a question from ERC deputy Inés Granollers.
“I cannot and should not comment on a potential operation involving two significant entities,” said De Cos, before describing the concern about the level of competition in the banking sector as “important.”
“It is evident that in the case of the Spanish economy there has been an increase in the degree of concentration. We had it below the EU and now it is surpassed. It may be a good time to pay more attention to this issue,” he assured.
The governor has also reflected on the relationship between competition and financial stability. “It has a certain complexity and we are concerned about both extremes,” he warned. When there is an excess of competition, banking profits suffer, which are “the main defense” against difficulties, but when there is an absence of it, the problem lies with the clients.
The issue of less competition has become the main element of complaint among businessmen and political authorities regarding the merger proposal proposed by BBVA to Sabadell. A union between the two banks would make the three main entities in Spain hold close to 80% of the assets and profits in the country.
De Cos has also defended mergers at the European level. “If we wanted to move forward in a banking union, in not having Spanish, French or Italian banks, but rather European ones, cross-border mergers would be one way to make it happen,” he indicated.
In this European context, “the relevant market would not be the domestic one, and the consideration of the degree of good or bad of the concentration would also vary,” he added.
When alluding to the slowness with which banks have transferred interest rate increases to the remuneration of deposits, De Cos has cited the high liquidity of the banks as a cause, but has also alluded to the degree of competition. “Banking concentration would also partly explain this lower transfer,” he said.
