The Bank of Spain considers, according to its latest financial stability report, that the two main risks for the Spanish financial system are the persistence of low profitability, due, among other factors, to the high volume of non-performing assets on the balance sheet, and an abrupt adjustment in market conditions due to geopolitical events.
Despite these difficulties, the figures indicate an improvement in profitability, driven by a combination of high efficiency, a decrease in non-performing loans, and high new credit. On the other hand, if quoted volatility is identified with risk perception, its current low level suggests growing investor confidence in the market’s current robustness.
Banks define their future strategy by considering factors they can influence or adapt to. However, there are external factors about which only predictions can be made with varying degrees of success. One of these is monetary policy, and another is precisely geopolitics.
