On April 10th, the Governor of Banco de España, Miguel Fernandez Ordonez, a few months before the expiry of his mandate, he has vigorously vindicated the action performed by the central bank as a supervisory authority in designing a new reality for the Spanish banking system, especially as regards smaller financial institutions.
In his analysis he starts from the observation that never had his country had to face three waves of crises in just a few years: the first international one, the second purely domestic and the third triggered by the euro and sovereign debt crisis. So three crises in part successive and partly contextual which have caused noticeable drops in GDP and tax revenues which led in 2009 to a current deficit of 11% of GDP and a current account deficit of the balance of payments of more than 10%.
More than the toxic assets of the Anglo-Saxon gambling markets, it was this macroeconomic context that negatively influenced the banking system. Likewise, these factors prompted the banks to authenticate industrial conversion of the Spanish financial system which has invested the "institutiones pequeñas y medianas", in a dramatic way.
Through a series of important legislative measures, the Fondo de Ordenada Reestructuration Bancaria – FORB was created in 2009, the central bank was endowed with greater and more effective supervisory and crisis management powers, and the various guarantee funds were merged. In the words of the Governor, the singular aspect was having to implement all the protective measures during the crisis. It is as if on a boat, while the evacuation of the passengers is being ordered, the lifeboats also have to be repaired, thus doing a double job.
The results in terms of reduction of the productive capacity of the banking system are significant: the number of branches decreased by 12% and that of employees by 10%. For the cajas de ahorro (savings banks) the reduction is more marked, equal to 16% and 13% respectively. 30 banks have also disappeared due to integration processes, including 28 savings banks.
Not having been able to count on a "banco malo", i.e. a bad bank capable of taking over bank losses and then passing them on to public finances, the restructuring process was long and tiring. Since 2007 Spanish savings banks have accumulated many weaknesses due to the strong growth of loans to the real estate sector, inadequate governance, poor market discipline and poor credit risk selection and monitoring. Within a few years, the worried diagnosis of the supervisory body concerned the excessive growth of credit, the abnormal expansion of production capacity, the dispersive fragmentation of the structure due to the presence of 45 banks without a clear division of property rights, but with strong interdiction power of local communities. Between January 2008 and summer 2011, the overall losses of the banking sector amounted to 10% of GDP, but the structure of the system has drastically resized, with the branches increased from 45 to 18 and transformed into commercial banks with more professional management.
Why are we closely interested in a speech that goes as deep as this one from the Spanish Governor? Because, given some due proportions and recognizing that some radical reforms were introduced in the Italian banking system during the nineties, with the aim of reducing the fragmentation of the system and promoting greater entrepreneurship, the critical situations that are emerging with increasing frequency among the banks of central-northern Italy lead to the question of whether it is not necessary to intervene again with system measures rather than with individual corrective actions. We are faced with the need for a substantial strengthening of our local banks, so important for our economy, as they are currently penalized by the crisis and afflicted by mismanagement, which is producing scandals and loans of dubious origin and dubious outcome.
Prompted by some positive parameters of local economies, since the early XNUMXs many banks have gone too far in their search for a sizing often dictated by mere image objectives, with evident inconsistencies between the development of operations and the growth of the territorial network and the number of employees. When the growth speed of traded volumes began to slow down, the accumulated inefficiencies immediately translated into increased costs and management rigidity, leaving little room for manoeuvre. At the same time, poor credit selection and a certain ease in managing conflicts of interest have worsened the quality of portfolios and attracted, in many cases, the attention of the judiciary. The causes of this bad government were the excessive influence of politics, national or local, not exactly forward-looking positions of the trade unions, where involved in the management, champions of banking entrepreneurship who are not always up to the task, little tendency towards innovation, transparency and competition. All of this, crisis or no crisis, is imposing growing and less and less sustainable costs on the country.
Emblematic cases of banking crises have already emerged, but many situations are still smoldering. The system, as a whole, gives insufficient signs of a downsizing of its production capacity, if one observes that in the last 5 years the number of bank branches has decreased by only 2% and that of employees by 5%, from 337.000 in 2005 to 319.000 in 2010. In the same period, the number of banks increased from 784 to 760 and other infrastructures such as agents, credit brokers and promoters remain redundant. In Italy there are 50 bank branches for every thousand inhabitants, against 36 in the European average and 20 in the more developed countries. This is also an expression of a reduced use of telematics, payment cards and other interactive methods based on mobile telephony and the Internet.
they follow industrial conversion needs, based on operations to consolidate the banking system, especially the smaller one, to be promoted fairly rapidly by introducing substantial process innovations in banking services. Unfortunately it does not seem that neither the Authorities nor the various trade associations are at the moment tuned in to this general line, so we will proceed with the management of the individual crisis situations, with a considerable waste of resources.
At the same time, the illusion will continue that ever more extensive and complex regulations can correct attitudes marked by the aforementioned discrepancies.
How can the effect of improper interference in management, of strategic mistakes that are often difficult to understand, of the lack of attention to the industrial aspects of the banking company, of the increasingly widespread situations of conflict of interest be reduced? We must avoid lumping everything together, but striking episodes have been there for all to see for many years. We must begin and, no one is offended, from a higher rate of technical knowledge of the administrative bodies. Boards of directors are often a place for opinions, rather than for deeply analyzed decisions, which fuels a lack of collegiality and the affirmation of individual positions that are sometimes perpetuated for many mandates and are transmitted within restricted circles, if not by succession also familiar. Little professionalism, little turnover, many clientele, and, when things go badly, the search for the man of providence, who, right from the start, claims the price of the scarcity of his performance. And, immediately after, the more hidden one of feeling, even psychologically, released from any control system.
In conclusion, they are needed general interventions, also of a legislative nature, capable of producing the reorganization and revitalization of the minor banking system, also because it can once again be a factor in promoting economic development. The courageous example of Spain, carried out without fearing accusations of dirigisme, imposes itself to an ever more binding extent also for our country.
