“May you live in interesting times,” goes the ironic curse known in the English-speaking world as the Chinese curse, although it has nothing to do with China. Unfortunately, we are living through extremely interesting times. And as often happens in turbulent periods, the first victim is rigour, certainty, truth. Today, a few viral tweets seem to carry more weight than clear, stated policies. But that is no reason to stop calling out every distortion of reality that we see.
One of the most pernicious is the one that pits health against the economy: we are told we must choose between one and the other. But that is not true: without health there is no economy because there is no certainty, and without it there is no investment, no consumption, no job creation. Because if the economy fails, health fails too, because we will not have sufficient resources to invest in medical and pharmaceutical research, in disease prevention, in costly treatments against illnesses as pernicious as cancer. Nor is the supposed dichotomy between the public and private sectors true: without a private sector that generates wealth and employment, there cannot be a public sector that collects taxes to invest in social policies and public goods. We live in a mixed market economy; there is no choice between the public and private spheres: for one to move forward, the other must function—and function well.
Another false choice presented to us is between economic stability and financial stability. There is no such choice: without one, the other is not possible, and vice versa. The 2008–2012 crisis is a bitter reminder of that interdependence between the two spheres. If banks are the circulatory system of any economy, it is impossible for the rest of the organism—the real economy—to survive without the support of the financial system. If, as a result of this crisis, financial health ends up being sacrificed, we must expect a future without health, without an economy, without jobs, and without growth or public revenues for social policies.
The good news is that Spanish banks are far better prepared than they were ten years ago: not only do they have much stronger capital and liquidity levels on their balance sheets, but their risk management is more professional and entirely free from political or regional interests—something that was not the case before 2007. And in this improvement we must acknowledge the work of the regulatory authorities, which have significantly tightened the rules imposed on the sector, thereby greatly strengthening banks’ balance sheets and their management capacity.
For all these reasons, in this unprecedented health crisis, banks have been able to respond swiftly, placing their considerable firepower in terms of liquidity at the service of public administrations, while also making available to their most vulnerable customers solutions to defer debt repayments or bringing forward the payment of pensions or unemployment benefits. In addition, under these unusual lockdown circumstances, they ensured the provision of financial services to their customers, without failures or disruptions, either through their digital channels or via personalised service in bank branches. This is a value that is not sufficiently appreciated. The flawless, full-capacity operation of a sector as essential as banking at such a crucial time is undervalued. Put differently, blessed be the digital revolution that the banking sector embraced with enthusiasm, because it is now allowing us to set aside any concern about the functioning of our payments system, our financial system.
In times of tribulation like these, certain clichés about the banking sector appear more frequently, born of a profound lack of understanding of the nature of its business. Banks manage other people’s money. And I am not referring to the money of those shareholders, to whom we have given so few reasons for joy lately and to whom we are so grateful, but above all to the money of our creditors—families and companies that deposit their savings or surplus funds with banks. It is to them that we are accountable, because the maintenance of that circulatory system of vital importance to our economies depends on their trust.
We must not, therefore, confuse the granting of credit with a non-repayable subsidy. That is not the role of banks: loans are granted to be repaid, because our fiduciary responsibilities to our liability-side customers—depositors—require it. Every loan must be granted after a rigorous risk analysis, now more than ever, so that anyone experiencing temporary liquidity difficulties can access the financing that will allow them to overcome those difficulties with more time. This also applies to ICO-guaranteed financing lines, where the public guarantee of between 80% and 60% of the loan amount will allow financing to flow to companies—particularly small and medium-sized enterprises—and the self-employed more quickly and more broadly, although the residual risk for banks is significant enough that this rigour in risk assessment must not be ignored, as the very regulation governing the guarantee line reminds us. This is the best way to protect the interests of both taxpayers and depositors, and of society as a whole, because in times of crisis it is more necessary than ever to preserve the solvency of the financial system, which is what will enable us to emerge from the crisis quickly and begin rebuilding our productive fabric as soon as possible.
I sincerely believe that Spanish society is fortunate to have the private banks it has. This was evident in the 2008–2012 crisis, when they were a bulwark of stability, at times even funding themselves better than the Spanish Treasury itself, without needing to be rescued with public funds (however much some insist otherwise, that is an indisputable truth for AEB banks). It was also demonstrated when an idiosyncratic crisis affecting one of its members was resolved without public resources (a case unique in Europe, to this day). And it will be borne out in the current and difficult situation, in which they will ensure that no solvent company is left behind. For all these reasons, I do not ask for recognition, but I do ask for respect so that banks can fulfil their function and thus help the economy—and all citizens—emerge from this situation with as little damage as possible. That is our commitment: to do everything within our power to ensure that this crisis becomes a painful and distant memory as soon as possible.
José María Roldán, Chairman of the Spanish Banking Association
