In this attempt at a prospective analysis of the 2022 financial year, the first thing I would like to say is that this new wave of infections brought about by the Omicron variant will be—I hope—a more or less fleeting phenomenon, which we are about to overcome and which will not excessively affect people’s health or the evolution of our economy. I firmly hope that this is the case and I am willing to believe it given the signs of strength shown by the Spanish economy in the final months of 2021.
Indeed, until this new episode of the pandemic, the economic recovery was vigorous and much faster than expected by many of us who, at the beginning of 2020, during those dramatic months of extreme lockdown, feared a slow and uncertain recovery and permanent damage to the financial and business fabric. But that shock, as profound and unprecedented as it was brutal and sudden, left fewer wounds than expected. By mid-2021, the V-shaped recovery, once the vaccination campaign had begun, started to become a reality, particularly in the OECD area and also, albeit with less dynamism, in Spain.
This good news was confirmed, and the Spanish banking sector has not been a stranger to it. Our entities entered this crisis with a genuine shield in terms of capital and liquidity. This allowed them to play an essential role in the first months of the pandemic, injecting liquidity into struggling companies through the ICO-guaranteed loan program. During 2021, they maintained healthy lending activity and managed to practically recover the profitability levels seen prior to the health crisis. This not only clears up any doubts about the sector or a possible systemic risk, but also represents a guarantee so that our entities can maintain and even increase the level of shareholder remuneration they had before the crisis.
Possible doubts regarding the level of provisions made have also been clarified, given the high volume allocated during 2020, the first year of the health crisis. Most importantly, the strong situation of our entities places them in a magnificent position to continue financing the recovery process, as they have done until now, by supporting families and businesses and raising any necessary funds from the markets easily and without problems.
But the commitment of our banks goes much further and responds to the new demands of society and the authorities for them to contribute decisively to the construction of a more sustainable and fair economy through an effective fight against climate change. Our entities have shown their determination to move forward in a practical way, accompanying their clients in the process of decarbonizing the economy, but to do so they ask the authorities for clear rules and criteria.
The European Commission is taking important steps in that direction, both from a regulatory point of view and by making substantial funds available to Member States under the Recovery Plan, with the clear orientation that they be used to build a greener and more digital Europe. Of those 750 billion euros, 140 billion will correspond to Spain (60 billion in the form of grants and 80 billion in the form of soft loans), an amount that our country will receive over three years and which will serve as a valuable lever to modernize the economy. Our banks have offered their collaboration so that these funds can reach the best projects and companies, given the capillarity of their networks and their knowledge of the Spanish business fabric, particularly SMEs.
The Next Generation EU funds are also aimed at boosting digital transformation, the other major strategic pillar of banking, which accelerated exponentially during the pandemic. This represents a tremendous incentive for our banks. In fact, the first litmus test came with the pandemic, and the banks successfully met the challenge of having to operate almost 100% digitally, overnight, both internally and with clients. Furthermore, this acceleration in the use of digital channels is here to stay, and we see the demand for online products and services from customers growing day by day.
However, in this digital world, many risks lurk. The most serious of all is that a part of the population may be left behind from the benefits of digitalization. I am referring to elderly people or those living in rural areas with poor internet access. To include these segments of the population, it is necessary to advance in several directions at once: providing these areas with better telecommunications and internet infrastructure, intensifying digital training programs for the elderly (currently hindered by the pandemic itself, which prevents on-site training), and seeking solutions for the issue of cash, which our banks are working on through agreements with town halls, commercial chains, and the postal service.
Among the risks of digitalization, we must mention new operators—a curious ecosystem where small fintechs, neobanks, payment operators, and large technology companies swarm, all eagerly entering the most profitable niches of the financial business without being subject to the rigors of banking regulation. This mix of shadow banking and technology not only represents a problem of unfair competition for banks but also implies serious risks to financial stability, as the authorities themselves acknowledge, though they have yet to take definitive action in this regard.
In the new digital ecosystem, we also face the emergence of new forms of money. I am referring to digital currencies such as safecoins, backed by liquid and tangible financial assets, and CBDCs, issued by central banks. There are no problems with these, but there are with crypto-assets like bitcoin, which have many negative aspects associated with them: lack of transparency, speculation, environmental problems, lack of investor protection, and tax opacity, which can undermine the progress made in the fight against money laundering.
And finally, there is the problem of cybersecurity, which has become a race against time to be faster than cybercriminals and to be well-prepared for increasingly sophisticated attacks. Banks are working intensely in this field on two fronts: one involving massive investments in technology and specialized personnel, and another through cooperation between banking entities and with national and foreign authorities. However, we need something more: the conscious involvement of users. The AEB has just launched an informative program on security measures that has been very successful, but we must continue to insist, because there is a lot at stake here.
In short, I believe that this positive evolution of the economy and banking activity will receive a strong boost during 2022 and could, furthermore, be reinforced by the expectation that this year will see the long-awaited end of negative interest rates. I sincerely believe that the serious impact that negative rates have had on the banking industry has been underestimated; while the transfer of income to the real economy has been colossal, and perhaps necessary during the last financial crisis, the disruptions introduced have forced banks—stripped of their core business of maturity transformation—to rethink their business models and undertake processes of consolidation and organizational restructuring. All of this has been carried out very quickly and, fortunately, with very little trauma. I hope that one day the effort of transformation and adaptation undertaken by our banking sector will be fully appreciated.
José María Roldán, Chairman of the Spanish Banking Association
