Not all the money saved during the pandemic is going towards consumption. According to the calculations of the banking association AEB, individuals have withdrawn 28,000 million euros in deposits since the beginning of the year to allocate them to early repayment of the mortgage and their loans at a time marked by the rise in interest rates.
This calculation was offered this morning by the president of the AEB, Alejandra Kindelán, at a conference at the General Council of Economists, in which she recalled that deposits, despite the withdrawals since January, start from levels “double 2008” and in which he has ensured that the low remuneration is not due to the absence of banking competition. Another 17,000 million deposit outflows are due to the “transfer to investment funds”, she has assured her.
The CEO of Santander himself, Héctor Grisi, highlighted this trend at the press conference to present the bank’s results. According to him, many withdrawals of deposits do not respond so much to the search for more profitable products as to the interest of individuals to repay the mortgage now that interest rates are at high levels.
The low remuneration of deposits responds in Kindelán’s opinion to “an environment of excess liquidity in the sector.” “Spanish banks are the ones that are returning the most liquidity to the ECB” and the low profitability “cannot be associated with a lack of competition”, among other things because “in all countries there has been a certain process of concentration”, he stated.
For banks, the benchmark for measuring competition is the Herfindahl index, which is calculated by squaring the market share of each participant in a market and adding those amounts. In the banking sector, excessive concentration occurs from 1,800, when in Spain the result is 1,270.
The AEB warns that “it is still early to know the effects of interest rate rises on the economy” and considers that Spanish banks are somewhat more protected from turbulence because they have “much more commercial balance sheets, based on credit, and less concentrated”, to which is added its geographical diversification. “42% of the results of the previous year were generated in activities abroad, which provides resilience by avoiding risk concentrations and facilitating the recurrence of the business”, Kindelán stated.
The granting of credit by banks in Spain is around 1.7 trillion euros, a figure similar to that of deposits. The credit tap has been reduced since the start of the interest rate rises, but the banks consider that it is not due to a problem of supply, but of demand, caused by the tightening of financial conditions.
The electoral advance has had a direct consequence for the Spanish banking sector, which is the suspension of the process in the Senate of the law for the creation of the new financial customer ombudsman. “We did not like how the authority worked” and “it was not necessary,” Kindelán pointed out. The creation of this defender is one of the points of disagreement between the Government and the banks, along with the new tax for “extraordinary benefits” derived from the invasion of Ukraine.
In June the Government plans to meet with banks and consumer associations to review the progress of the new aid for mortgagees. The AEB has not been convened yet, but it understands that the meeting “is still going on”. He is also confident that the Government will request the addendum to the Recovery Plan from Brussels in time, which aims to mobilize 94.3 billion euros of additional European funds.
Spanish banks are also calling for a regulatory change at the European level so that large technology companies with banking activity “have the same rules” and do not take advantage of data management.
“The current regulations lead to asking the banking sector for more data and less for others,” Kindelán stated before explaining that work is now being done at the European level on the PSD2 directive on data and on the regulation on Open Data.
“It seems fine to me as long as there is symmetry” because “this is not about only sharing data from the financial sector”, especially when digital companies are also allowed to cross-reference it with user search behavior. “There is an asymmetry there. Banks also need to be able to combine financial and non-financial data to provide solutions,” he added.
