Spanish banks agree with the ECB in pointing to liquidity as one of the key elements to respond to a possible accelerated flight of deposits. For this reason, they demand that the European Commission improve the mechanism to supply cash in the event that entities are exposed to a crisis such as that of Credit Suisse in Switzerland or Silicon Valley Bank (SVB) in the United States.
"Many times, the problem you may have is liquidity and not capital", and "it is good" that the European Commission works along these lines, said the president of the Spanish Banking Association (AEB), Alejandra Kindelán, during the press conference after the association's annual meeting, alluding to the new banking crisis management mechanisms that the European Commission is expected to present this week.
The vice president of the ECB, Luis de Guindos, warned last week in Madrid of the risks of capital flight "at the click of a button" in a hypothetical scenario of a bank panic accelerated by digitization and alluded to additional liquidity measures such as the formula for respond to these stresses. SVB and Credit Suisse have a different casuistry than banks in the euro zone, but serve as a warning against episodes of accelerated withdrawal of deposits. The Swiss bank has been helped with a liquidity line of 100 billion Swiss francs in case of need.
The AEB is aware that liquidity has now become one of the elements that receives the most attention for the financial system. He calculates that Spanish banks are on average in a better position than European ones, with a ratio of 171%, which would give them the capacity to face deposit outflows for longer, compared to the average of 165% in the euro zone. In this calculation, 100% is equivalent to supporting 30 days without liquidity.
"They have a stable and diversified deposit base. 66% of them are protected by the deposit guarantee fund," Kindelán stated, before underlining the "good position" of Spanish banks. The non-performing loan ratio is low, at 3.4%, while the excess capital with respect to the ECB's requirements stands at 60,000 million euros. "Spanish banks are among those that would destroy less capital in an adverse scenario," he has indicated.
The European Commission is reviewing what is known as CMDI (Crisis Management and Deposit Insurance), which will include measures to alleviate the blow of eventual banking crises. Apart from "resolving the liquidity problem under resolution", the AEB calls for a "simplification of the framework so that entities understand the regulatory requirements and more harmonization, especially in the creation of a single deposit guarantee fund at European level". He wants "banks to be valued by their solvency and not by their nationality."
Kindelán has warned that credit will foreseeably suffer restrictions due to the ECB's monetary policy and has anticipated that "excess liquidity" in the system after the pandemic "will be drained in the coming months".
It has not identified the moment in which the deposits will begin to be remunerated, but it has assured that the delays in Spain in this regard do not respond to "a competition problem". As he says, there is "fierce competition" between banks.
The AEB welcomes the Government's announcement that Sareb will put 50,000 affordable rental homes on the market and recalled that Spanish banks have another 10,500 homes that they have managed since 2012 with social criteria. "It is always good to expand the public housing stock. It is something that our country needs," he said.
Regarding the closure of bank branches and the plan agreed by the Government to continue providing services in rural areas, Kindelán explained that the objective is now to tender ATM services in the 243 municipalities with more than 500 inhabitants without a bank presence.
From that moment on, and in places where a solution has not been found, work will be done on a system of white-label ATMs operated by Redsys. In this plan, banks are relying on other types of companies, including logistics and cash management.
