In autumn 2019, our member institutions saw the long-awaited monetary normalisation recede on the horizon, while facing a less favourable economic environment with a clear downward trend. The decision taken by the ECB at that time made it clear that very low, and even negative, interest rates would persist for several more years, so it was advisable to adapt to the new situation as soon as possible. Although it is difficult to achieve reasonable returns with the current yield curve, our banks have managed to improve their profitability in recent years in this unfavourable context and can continue to do so. However, profitability will undoubtedly remain the major challenge in the years ahead. <\/p>\n
Lower activity and ultra-low rates make the search for profitability even more difficult, while the sector must also deal with challenges raised in recent years that remain unresolved. On the one hand, regulatory adaptation\u2014a process that is nearing completion but still has several active fronts (Basel IV<\/em>, resolution capital, etc.). On the other, the digitalisation process, with its substantial investments and the new risks it brings, such as cybersecurity and the opening of banking activity to new technology competitors, particularly BigTech. In addition, institutions must continue cleaning up their balance sheets and strengthening their capital bases. <\/p>\n Added to all this is a project that banks have been working on for several years, but which last year took off with unprecedented momentum and visibility: the contribution of the financial system to the fight against climate change, which is the key element in the transition to a fairer and more sustainable economy. It is a growing global awareness process that will change many aspects of how we produce and consume. Our member institutions positioned themselves very early in favour of responsible finance, a field that has begun to be regulated and whose development will entail an enormous workload for the sector and the deployment of substantial financial resources. In this area, it is essential that the authorities clarify as soon as possible the major uncertainties that are preventing the sector from moving forward with confidence. <\/p>\n At AEB, we want to support our members in this new area of work. On the one hand, we are paying close attention to the rules that will govern this activity, such as the taxonomy the European Commission is working on to define what is green and what is not. In addition, we have created FinResp as a facilitator of business transformation\u2014particularly for SMEs\u2014through innovative financial solutions. This is the first time the entire Spanish financial system, through its business organisations, has promoted a project of this nature. As FinResp and also as AEB, we were present at the Climate Summit held in Madrid in December 2019. Now we must deliver on the commitment signed within the framework of COP25 to align the balance sheets of the signatory banks with the Paris Agreements. <\/p>\n This early positioning does not conceal the fact that progress in this area is difficult and costly, especially in the current environment of low profitability and high levels of litigation. Markets, while applauding these initiatives, do not yet differentiate in price\u2014either by products or by institutions. In other words, there is no reflection in lower funding costs or better share performance for institutions that bear the higher costs involved in complying with sustainability principles. That said, the market will be unforgiving with companies that do not undertake this transformation. For now, it is a world of asymmetries and penalties, but not incentives. <\/p>\n