I don't think some financial institutions are doing the right thing by airing such amounts of dividends and executive compensation, at a time like the present, as we are seeing these days. That said, to argue for greater caution, even assuming shared goodness of purpose, the means of argument have to be coherent and rigorous so that criticism does not delegitimize the purpose. It is not worth talking about profits in absolute figures (they all sound like billions!), but relative to assets or business figures, nor taking the part as the whole in a global business such as finance for some Spanish banks. But with the strength of the facts, we could say that in a period of reduction in the weight of salaries and loss of real gross income available to families, the figures for dividends and compensation that entities have recently presented do not leave them in a good position. before public opinion.
Shareholders like dividends, particularly the more short-sighted ones who enter and leave the stock markets speculatively. The CEOs of the entities join the party with extraordinary compensation, even though it is not likely to be worth what they cost to satisfied shareholders in a narrow enough market for managers. Spanish entities clearly act oligopolistically: they transfer monetary policy changes to the Euribor and to their credit business, but they look the other way when it comes to remunerating savers' deposits, which run towards public debt and continue to see it eroded your deposits.
On the one hand, the statements by the president of a large Spanish bank in the presentation of results, saying that the remuneration of deposits will only rise as a reaction to competition, is surprising and a confirmation of the existence of an oligopoly, taking into account that they are one of the big players in the market. Does the National Commission for Markets and Competition have nothing to say to that? On the other hand, a party with government responsibilities (including the Minister of Consumption!) asks for the limitation of the price of mortgages and says nothing about the treatment of depositors. Do you want savers to subsidize mortgages? Do the elderly who have saved for their old age have to subsidize who can buy a house today? Although it is even worse that the poor saver subsidizes the profits.
It is true that entities do not need that money from savings today, since the European Central Bank (ECB) already gives them abundant liquidity, that is, a little bit of all European citizens; hence bank behavior is seen as unsupportive. The ECB, having done what it thought it had to do, now finds itself having to combat with monetary policy the excesses in fiscal policy of many governments that it has helped finance. These, to fiscally combat the effects of monetary intervention by the ECB itself (the one that causes pain) aggravate the need to intervene through monetary policy to curb inflation that otherwise feed. But this is another issue, which together comes to weaken the euro again. That said, formally the ECB and the governments are both fighting the same enemy: inflation. Some trying to lower it, others minimizing its negative effects on the most vulnerable. But macroeconomic reality may end up generating a loop.
In a circumstance of comeback of the banking business like the current one, I think that the regulator would have to make it more difficult to share profits between one and the other, forcing more reserves and supplies (statisticians we said in my time on the board of the Banco de Spain), forcing the piggy bank to increase when things are going well (when, if not?). Despite knowing that this is not easy due to the political strength that the entities have, accompanied by a sufficiently liberal regulation, I believe that it has to be tried again. I remember very well the problems that the deputy governor and director of regulation had when they were called to appear before the powerful American SEC (the Security Exchange Commission) against this practice, which made it difficult to distribute profits among the shareholders of our banks that were listed on Wall Street. . Who is, they said, the Bank of Spain to put up obstacles in distributing dividends in that context of Spain doing well? But it was done.
Time passes and mistakes come back. The banking sector, publicly over-protected due to the systemic risk that its crisis can generate in an economy as heavily banked as Spain's, is once again entering a process of reputational loss perhaps only surpassed by the tobacco industry and some pharmaceutical companies. It should be remembered that the banks have recently received public aid (massive financing from the ECB at a negative rate) through the so-called Tltro for practically all of 2022, and the massive guarantee of the Official Credit Institute for the weakest clients, which allowed him to control his own delinquency. The cuts in face-to-face services to many citizens at a time when they are announcing record results do not help their reputation either. Bitter opposition to the new bank rate is also against his reputation. The results presented thus seem to agree with the Government and, if they do not wake up and moderate, instead of temporary, citizen rejection can become permanent.
The rescue of the banking crisis, carried out by citizens in general, has already left its mark on the prejudice of many Spaniards against financial institutions, and the current situation, with what we observe, increases it. As we need banks for the proper functioning of the economy, and now especially to help the climate transition -vehicle the credit risk weighting of some investments that are not very sensitive to climate change-, a minimum of moderation is imposed to improve the valuation that of the bank has public opinion.
