SVB was negatively impacted in its assets (over 55% fixed income) and liabilities (funding) by the interest rate hike decided by the Fed. This differs from European banks, which have a high proportion of credit in their assets.

Strong and more volatile deposit withdrawals, concentrated among corporate clients in the technology sector with high cash consumption and limitations in funding rounds, in a world interconnected by social media, forced that bank to sell bonds at significant losses to cover these outflows, as a capital increase was not possible.

This bank was not subject to a regulatory framework to cover interest rate risk on its balance sheet, nor was it, unlike in Europe, obliged to comply with the demanding liquidity ratios of eurozone banks.

The European Systemic Risk Board had already warned a few months ago about the need to be prepared for the deterioration of economic activity and the instability of financial markets in a context of official interest rate normalization.

In line with that recommendation, Spanish banks have become very solid, possess a diversified and stable deposit base, are subject to strict supervision, and comply with demanding liquidity requirements.

José Luis Martínez Campuzano, spokesperson for the Spanish Banking Association

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La entrada Confidence in Spanish Banking se publicó primero en Asociación Española de Banca.

In the short term, the Next Generation EU (NGEU) plan is already helping to boost growth thanks to increased demand. However, its medium-term importance is greater as a key component for the modernization of European economies. Through its two channels, capital injection and financing, the plan offers an opportunity to achieve solid and sustainable growth over time, accelerating economic convergence within a Eurozone damaged by both the health crisis and structural issues. The funds are conditional on concrete investment and reform proposals for the 2021-2026 period.

While not designed for continuity over time, the funds undoubtedly represent a step forward in the necessary creation of a common fiscal capacity, essential for completing the European Union. However, they entail counterparts and reforms, also when designing a debt adjustment plan for countries with higher public debt. All of this could also increase the ECB’s room for maneuver when designing and executing monetary policy in an environment like the current one with higher inflation.

It is estimated that NGEU will increase the weight of European public investment by more than 2 percentage points in the medium term, with an impact on growth of half a point in 2023. And reality could exceed these estimates if we consider the positive effect of reforms and succeed in encouraging the confidence of economic agents. At this point, public-private collaboration is fundamental to achieving greater efficiency and effectiveness of the funds, and banks, without a doubt, are a key player in Spain.

20% of European funds must be allocated to digitalization with various approaches: public administrations, businesses, digital training for society, and improved connectivity, reflecting the importance of the digital transformation we are experiencing and the extent to which it will shape our future.

Why is digitalization so relevant in European funds? Because it is key to the process of social and economic inclusion, as highlighted by the IMF. All the economic and social changes we are observing have digitalization as their central axis, and all economic and social activities now routinely use digital channels. This is a structural change from which all economic agents benefit.

According to data from the Ministry of Economic Affairs and Digital Transformation, in just one year of health crisis, the digital economy’s contribution to GDP increased from 19% to 22%. During the pandemic, a technological leap was achieved in a few months that would normally have taken years. Digitalization protected us from illness, allowed essential private services like financial services and public services to function. It also enabled teleworking so that many companies could maintain their activity. And perhaps most importantly, it allowed us to communicate during the toughest moments of lockdown.

Like any structural change, digitalization will require a more or less prolonged period of adaptation; a significant challenge for many individuals, businesses, and governments, which not all of us will be able, or willing, to face. Given this reality, it must not be forgotten that digitalization should be an advantage at our disposal, but never an insurmountable barrier. Banks have understood this clearly, and as we advance in the fight against the pandemic, they have readjusted access to financial services, ensuring in-person and preferential attention for the elderly and people with disabilities who require it.

The efficient use of NGEU funds is key to regaining some certainty about the future in a context as complex as the current one. We all must collaborate to make it possible, with public-private cooperation as the axis of action, essential to avoid wasting indispensable resources for Spain that also require good management and sound investment in initiatives that promote the necessary social, energy, and technological transformation.

José Luis Martínez Campuzano, Spokesperson for the Spanish Banking Association

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La entrada European Funds and Digitalization se publicó primero en Asociación Española de Banca.

Technological advancement and its reflection in digitalization have allowed the emergence of new competitors and business models related to financial activity that compete with banks in the provision of financial services, although focusing only on the most profitable ones. Unlike these technology companies that offer banking services under much more superficial regulation and supervision, banks serve all their customers, regardless of whether they are accustomed to new technologies or prefer more traditional attention through bank branches. And they are a guarantee of protection in this Fintech revolution we are witnessing, the result of applying increasing technological innovation to financial services, which brings many benefits to the user, but also some risks that must be known.

If we talk about risks for the consumer, we must ask ourselves whether the user of financial services understands, in most cases, the type of entity or the legal personality behind a new innovative brand and, therefore, what legal protections they have in the event of a failure or error. It is common to use terms such as ‘neobank’ or ‘digital bank’ to refer to some of the new companies that, in many cases, do not have the status of a credit institution and cannot carry out the activities legally reserved for them.

Monitoring what happens in such a dynamic market with so many new players is becoming a complex task for financial supervisors and also for regulators. Beyond competition issues, which are also a concern, authorities are focusing on risks to consumer protection and financial stability, because encouraging innovation and competition must never translate into less protection for the financial customer.

Customers must know clearly how their money is protected, something they do know in the case of banks. For example, some products offered as ‘accounts’ are not considered deposits and, therefore, their balances are not covered by the Deposit Guarantee Fund of credit institutions. There is also concern about the increase in lending activity outside the banking network. Although diversification in sources of financing for companies and families is positive, it must always remain under the regulatory and supervisory radar.

Banking is a disciplined sector that responds to extensive and highly demanding regulation, which has undergone many profound changes since the global financial crisis triggered in the United States in 2008. Unlike other listed companies, banks are subject to specific regulations, both EU and Spanish, which are more advanced than corporate governance requirements. Rapid adaptation to these requirements has enabled Spanish banks to significantly increase their solvency and resilience, thereby meeting customers’ needs during the worst of the health crisis.

The strategy of banks involves satisfying their customers. Their commitment is to offer the necessary financial services to all consumers. It is the customers who decide which channel they choose among those available to communicate with their entity: branches, telephone and digital banking, collaborating agents, and ATMs. The banking sector is also entering into collaboration agreements with other institutions and companies that complement the communication channels of the entities with the sole purpose of continuing to reinforce the improvement of the quality of customer service.

In addition to the change in customer habits and customs, as they visit branches less frequently, banks operate in a scenario of low profitability as a result of the prolonged scenario of negative official interest rates. To adapt to this environment, banks are carrying out the necessary structural adjustments, changes that supervisors have been demanding for some time and that are undertaken in order to continue playing a key role in overcoming the crisis. The priority for banks is to support families and businesses and drive that post-Covid economic recovery that we all desire, based on a new economic model better than the previous one, more respectful of the environment, more digitalized, and more beneficial for all layers of society.

José Luis Martínez Campuzano, spokesperson for the Spanish Banking Association

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La entrada The customer, the priority se publicó primero en Asociación Española de Banca.

Many consider economics to be the science of scarcity. This is not a bad definition, since we are all aware of the scarcity of resources to meet human needs and desires, which far exceed what is available. In this context, we are forced to make financial decisions—of greater or lesser importance—every day. To avoid acting hastily and facing shocks or long-term problems, it is necessary to have financial knowledge—“financial literacy”, as some would say—and to control our impulses when it comes to consumption.

We make decisions freely and are responsible for their consequences, so having the best possible education from the beginning contributes to the proper management of our personal finances, to better handling our money, something necessary at all stages of life. It is important that from an early age we are aware of what things cost, that we learn to differentiate between wants and needs, and that we become accustomed to thinking about saving for the future. These are basic notions of financial education that should be conveyed naturally at home and learned at school. At the Foundation of the Spanish Banking Association (AEB), we have always been clear about this, which led us eight years ago to promote the “Your finances, your future” project thanks to the collaboration of our partner banks. Since its launch, more than 40,700 secondary school students from schools across Spain have benefited from its programmes, delivered throughout this period by more than 3,000 volunteer bank employees. The latest edition of the programme, which began at the most challenging moments of the pandemic in March 2020, was able to continue thanks to the dedication and commitment to continuity of these volunteers, who delivered the classes online in line with public health recommendations.

With the collaboration of the renowned Junior Achievement Foundation, the programmes cover basic topics in finance, cybersecurity and responsible consumption. According to the impact assessment of the latest programme, 98% of students consider that they are now more aware of the importance of saving and want to repeat the experience. The same is true of all the educational centres where the programme was delivered, which appreciate the key role played by volunteer bank employees in young people’s education. For their part, the volunteers also give a very positive assessment of the programme, aware of the importance of fostering the development of healthy financial habits in young people with a view to everyday decision-making in the future.

Now that the light at the end of the pandemic tunnel is coming into view, it is a good time to assess, in a reasoned way, the decisions we expect to make, since as confidence in the future improves, we could see an increase in consumption that was pent up during the health crisis and pushed the savings rate to historic highs worldwide.

The low level of financial education in Spain has always concerned the financial sector, but even more so in the current context, because the ability to manage money and think critically is an indispensable requirement for any individual, with a significant impact on both financial stability and overall economic performance. Countries with a higher level of financial education show greater resilience to crisis and recover faster than the rest.

José Luis Martínez Campuzano, spokesperson for the Spanish Banking Association

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La entrada Financial literacy se publicó primero en Asociación Española de Banca.

For this reason, the spokesperson explained, banks have collaborated with the authorities on the measures taken and have complemented them with others at a sectoral level, “all thanks to the effort and commitment of the sector’s professionals” who have guaranteed the necessary financial services at all times and in all places.

“Spanish banks are committed to being part of the solution to the crisis, making our resources available to the productive economy,” emphasized José Luis Martínez during his speech at the webinar ‘Family Dialogues: the new banking reality’ held on October 8.

In the new scenario opened by the health crisis, in which the process of banking digitalization has accelerated, “the challenge is to increase society’s skills in the use of new technologies,” an objective shared by Expertclick, the technology school of AEB and the Cibervoluntarios Foundation for seniors living in rural areas affected by depopulation.

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La entrada Spanish banks, committed to being part of the solution to the coronavirus crisis se publicó primero en Asociación Española de Banca.

Awareness of the threat posed by climate change is becoming increasingly evident, both individually and collectively: economic actors have long been aware of the need to combat global warming through a less carbon-intensive production system, and to promote economic growth that benefits all segments of society, especially after the health crisis caused by the pandemic, which has hit the most vulnerable hardest.

This is not merely opportunistic rhetoric driven by its positive reception in society—quite the opposite. Social and economic stakeholders need the authorities to strengthen the commitments they are making through clear changes to the regulatory and legal frameworks that remove uncertainty and smooth the way for them to move more decisively along the path of sustainability. This level of specificity is essential for companies’ day-to-day activity and for increasing the presence and transparency of sustainable financial assets in the markets.

Innovation and the energy transition form the basis of the recent agreement reached in the EU to drive the economic recovery after the pandemic. The pact views the current crisis as an opportunity to move decisively towards a stronger growth model with lower environmental costs. Its greatest challenge is to align the essential short-term economic stimulus with an approach that is sufficiently sustainable. Our authorities are called upon to define a clear strategy with a perfect and lasting alchemy so that the magic works.

José Luis Martínez Campuzano, Spokesperson for the Spanish Banking Association

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La entrada Beyond words se publicó primero en Asociación Española de Banca.

In Spain, access to financial services is easy and widespread, and their cost is well below the European average, according to a recent Deloitte study. Banks offer their customers a wide range of communication channels, from traditional branches to digital apps and websites, as well as ATMs, mobile branches and commercial agents. Spain’s extensive bank branch network, with the highest density per inhabitant in Europe, highlights the industry’s effort to communicate with consumers.

At the same time, our banks are leading the digital transformation across the continent to meet society’s growing demand for online services and products. The key is to always strive to provide the best service, regardless of the channel chosen by the customer. As part of this service strategy, accessibility is a priority and a goal for banks. They set out on this path some time ago, but they still have a long way to go.

Disability cannot be an obstacle in the relationship between the customer and their bank. The financial industry is very clear about this, and its commitment to removing communication barriers is firm. Each institution chooses its own solutions. The approaches are diverse: physical adaptations to branches, apps for people with visual impairments at ATMs with information in braille, sign-language video-call services for people with hearing difficulties, or induction loops in branches.

According to the 1st National Accessibility Plan 2004–2012, approximately 40% of the population benefits from accessible products and services. This percentage may increase if we take into account the decline in abilities that can accompany ageing and if we understand disability as any barrier that prevents people’s autonomy. In the case of financial products and services, the challenge is not so much adapting them to the customer’s personal situation as offering them through a channel they can use. Here, technology is a powerful ally in achieving this.

Technology and innovation enable us to advance the social inclusion of people. Together with digitalisation, they remove material barriers arising from limitations in people’s functional abilities. We must all have the opportunity to improve our quality of life within a dynamic society that is increasingly technology-driven.

The World Bank notes that Spain ranks second in Europe for financial inclusion, and among the leading countries worldwide. The ambition of our institutions is to continue providing the best service to all customers to ensure their satisfaction and maintain a long-term relationship with them—essential if banks are to achieve their economic objectives in the current context of digital transformation.

Few people are still unaware of this, as are the sceptics who do not appreciate the enormous benefits of the digital revolution, which removes borders and makes it possible to deliver financial products and services in personal circumstances and even to places where it was previously very difficult.

José Luis Martínez Campuzano, spokesperson for the Spanish Banking Association

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La entrada Leading barrier-free banking services se publicó primero en Asociación Española de Banca.

Financial training has always been essential, for everyone and in every aspect of life. In the case of investors, good financial training will lead them to make financially responsible decisions, with an understanding of their rights and obligations when using financial products. Financial education is also a tool for the authorities responsible for customer protection, precisely because helping to promote training strengthens it. Financial institutions devote enormous resources to improving society’s financial education because it is something that benefits everyone.

An OECD study wryly reflects the concern of many investors when deciding on their investments: it is far more stressful than going to the dentist. Any decision related to our assets or our money is never easy, although having good training helps greatly, enabling us to see the pros and cons from a medium-term perspective. The impact of the crisis was more moderate in countries with higher financial education, and their recovery has also been faster. This is no coincidence.

José Luis Martínez Campuzano, spokesperson for the Spanish Banking Association

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La entrada Financial education for everyone se publicó primero en Asociación Española de Banca.

The new Real Estate Credit Contracts Law is very demanding for operators, banks, and notaries, especially during the informational stage prior to signing the contract, in order to reinforce transparency and thus client security. The objective is for the client to fully understand the contract’s characteristics, which requires sufficient time to analyze it at the notary’s office chosen for the signing. Since its implementation, banks have consistently maintained their capacity to grant loans and the quality of client service, while also making a great effort to adapt their processes to the demands of the new regulation, thereby preserving the security and transparency that govern the Spanish mortgage market.

An example of banks’ willingness to maintain the flow of financing for families’ home purchases, their main asset decision, is that the balance of new mortgage credit operations amounted to 11.5 billion euros in the second quarter of the year, which is 900 million more than in the first three months. And under very favorable conditions. In June, the average interest rate on home loans was 2.57% (3% lower than a year ago) and the average term was 24 years. Clients opted more for variable interest rates, although the strong growth of fixed-rate mortgages continued. Banks offer clients a wide range of financing options transparently, with the client choosing the one that best suits their interests and future prospects. Fixed-rate mortgages can offer clients more security by knowing the cost of the loan in advance until its maturity. They are predominant in most European countries.

Signs of economic weakness observed in Europe may lead the European Central Bank to maintain expansive financial conditions longer than initially anticipated. However, the monetary authority itself reiterates that this is an exceptional situation responding to the exceptional nature of the economic scenario. Each bank markets its products and sets its pricing policy according to its own commercial strategy in an environment marked by high competition. The floor for interest rates on mortgage loans is set by the Real Estate Credit Law, which establishes that the remunerative interest in variable interest rate operations can never be negative. This clarifies something that is already inherent in the rationality and nature of loan contracts, since its counterpart is the payment of a compensatory interest rate that has been agreed upon.

The high dynamism of the housing market so far this year is not only due to reduced unemployment and very favorable financing conditions. It is primarily due to the deeply rooted culture of home ownership prevalent among Spanish families, which goes beyond a generational issue. It is essential to preserve the characteristics of the mortgage market that serves society so well, which necessarily requires clear and stable rules over time that offer security and trust.

José Luis Martínez Campuzano, spokesperson for the Spanish Banking Association

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La entrada Mortgage Conditions se publicó primero en Asociación Española de Banca.

Our young people are self-sufficient, regular users of digital media, and thus have access to a wide range of products and services where they can compare and choose quickly. Immediacy, flexibility, convenience, and transparency reflect their preferences as digital consumers. This is also true when they demand financial services. In addition to these four qualities, banks offer them trust, privacy, and security, because using new technologies entails significant risks that every user must take into account.

The heavy investment in digitalization by Spanish banks, driven by technological development, responds to the demand of customers, including young people, a strategic segment for credit institutions. Digitalization and innovation translate into greater efficiency for banks and also into the possibility of offering a more specialized service tailored to their customers. In this way, the characteristics of our banking system are reinforced: competitive, innovative, and accessible to an increasingly broad public.

The services offered by banks have no age limit. The mortgage system has allowed more than 80% of families in Spain to own their own home, where the percentage of young families with financed home ownership is among the highest in Europe. It is the obligation of banks to help young people with their financial education and to accompany them in the various financial decisions they will have to make during the different family and professional stages throughout their lives. They did so with the parents and are willing and prepared to do so with the children through the model of relationship with their bank that they choose.

Digital innovation allows for the reduction of entry barriers in the provision of banking services, thereby increasing competition with non-bank entities, as is the case with recent regulatory changes. Banks, accustomed to competition and with a proven capacity for adaptation, view this process as an opportunity to offer new products and reach new markets, but they demand that new competitors be subject to the same regulatory and supervisory requirements for the good of the consumer. Authorities must also not overlook the potential adverse consequences of large technological platforms entering the financial sector. They must find a balance between maximizing their positive short-term effect on innovation and competition and the need to preserve consumer welfare and financial stability in the medium and long term.

Banks are aware of the need to do things right, to be responsible in their actions, and thereby reinforce the trust of their current and future customers. Young people are always the future, and banks are preparing to meet their needs with a range of services and products that are increasingly digital, mobile, and innovative. In this model transformation, banks will continue to guarantee the protection of information and the security of their customers, something that should be required of all competitors. The trust of young people in the reliability of bank services and products is key to competing in an increasingly digital environment.

José Luis Martínez Campuzano, Spokesperson for the Spanish Banking Association

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La entrada Banks are for all ages se publicó primero en Asociación Española de Banca.