Few doubt that banks are now much safer than before the crisis, which was to be expected given the effort they have made to comply with the demanding and complex regulations and strict supervision that emerged after the Lehman Brothers collapse. However, the question authorities are now asking is whether the financial sector is robust enough. The financial sector in general is being discussed, without acknowledging the good results banks achieve in annual stress tests and the significant adjustments they have made to non-performing loans and unproductive assets. No distinction is made between banks and those companies that are not banks, nor are they subject to their rules and controls, yet offer banking products and services.
The vulnerabilities that some authorities point out for banks are not related to the development of their activity but rather to the difficult international macroeconomic environment, the zero official interest rate scenario in Europe, new non-bank competitors, and cybersecurity. All these are cyclical factors that are added to other structural factors such as the change in model brought about by the digitalization of society and adaptation to the fight against climate change, which will entail new obligations and lead banks to play a predominant role in ensuring the necessary financing to pave the way for the transition to a more sustainable economic and social model.
Given such a complex scenario for banks, it is appropriate to propose a period of reflection on regulation to assess the rationality and impact of already approved rules, which are numerous and extensive. Regulatory certainty is essential for banks to define and develop a strategy that enables the sector to adapt to the innovation and digital transformation demanded by its clients. It is also important to assess the risks and distortions arising from the prolongation of exceptional monetary measures in Europe. One cannot speak of normality in a context marked by negative interest rates and monetary expansion that seems endless, especially when the authorities themselves acknowledge the exceptional nature of these measures and, worse still, admit that they can have undesirable effects on financial markets that other prudential measures cannot combat. Regarding competition from new technological operators, it must be on equal terms to preserve adequate consumer protection and financial stability.
The banking business is based on risk management, and the objective of regulation is to improve the control of assumed risk so that, in the event of serious problems, its consequences can be decoupled from public finances and client protection can be strengthened. However, attempting to reduce the risk assumed by credit institutions to zero is not only detrimental to banks and their clients, but it also hinders the financing that the economy needs, especially in Europe, where banks play a fundamental role as transmitters of monetary policy and where decisive progress is needed in the process of digital transformation and economic and social innovation. Regulation should not be a brake on innovation; instead, it must adapt quickly to new times, just as other economic agents do.
For a bank to be strong, it must also be profitable, which ensures its future survival. And the key to improving profitability is efficiency: fostering income, controlling expenses, and boosting productivity. Banks are clear about this and are taking steps to achieve it. It is important for everyone that authorities support them in this endeavor.
José Luis Martínez Campuzano, spokesperson for the Spanish Banking Association
