The National Markets and Competition Commission (CNMC) focuses on the concentration of banking in Spain, which it sees above that of neighboring countries, just before having to decide on the purchase offer of BBVA for Sabadell Bank.
It does so in a report in which it analyzes the factors that have conditioned the low remuneration of bank deposits in Spain since 2022, with the rise in interest rates after the start of the war in Ukraine.
This is a report commissioned by the Ministry of Economy and which confirms that this remuneration has been lower than in neighboring countries. Specifically, he points out that, “in June 2024, the stock of deposits of Spanish households paid an average of 0.48%, which contrasts with 1.17% in the euro zone (more than double) and still more with the 3.75% offered by the ECB in its deposit facility (almost eight times more).”
Regarding the competition itself of the Spanish banks, the organization headed by Cani Fernández points out an “intense restructuring process initiated with the financial crisis” that has resulted in “the concentration indices of the Spanish banking sector have risen to levels superior to those of surrounding countries.”
“At the national level, the concentration indices of banking assets in Spain are at moderate levels, but considerably higher than those registered in comparable large economies of the eurozone, such as France, Germany or Italy, and those registered before the financial crisis” , he argues. Also that this process is not the same throughout the territory.
“The main conclusion is that the majority of Spanish provincial markets show concentration levels higher than those indicated by the indicators calculated at the national level,” he assumes. “However, concentration levels at the provincial level are very heterogeneous and particularly high in provinces with low population density or population concentrated in small cities,” the report explains.
“It is also important to highlight that, although the first three entities at the national level (Caixabank, BBVA and Santander) have a very widespread territorial presence, there are also other entities that, despite having a small share at the national level, have a very widespread presence. relevant in certain geographical areas,” he adds.
It must be remembered that the CNMC is analyzing in depth, the so-called phase 2, BBVA’s takeover bid for Sabadell, precisely to go into detail about its effects on banking competition.
Precisely, he considers that concentration, although it has had an influence, is not the only reason behind the lower return on deposits since rates took off. There, for example, “the costs associated with changing banks” also come into play, because “they can reduce customer mobility in certain segments.” This is where loyalty policies come in – such as subsidizing mortgage interest for direct debiting the payroll, contracting additional products or maintaining a level of account balance –, the problems associated with the process of searching for alternatives, due to lack of standardization and the comparability of commercial information on deposit products; and some practical difficulties in account portability between banks.
It also mentions as an explanation that financial products that can replace time deposits, such as investment funds or Treasury Bills, still exert little competitive pressure. And he mentions that financial education in Spain is inferior to most eurozone countries. “This can limit the ability to compare offers and contract substitute products for deposits that are more complex,” he argues.
As an alternative, he assumes, there are new entities or neobanks. It mentions the “growing presence of entities that operate exclusively through the online channel, especially in the younger segments” that “have increased their activity in collecting deposits.” “Despite everything, these new digital financial operators remain mostly specialized in certain payment services and their share in the deposit market remains moderate. Furthermore, despite the fact that Spaniards are a highly digitalized population, they also exhibit a relatively high degree of distrust in the use of online banking services, according to Eurostat.”
Public-private solutions
Among the solutions proposed by the CNMC, in addition to making it easier to change banks, it recommends targeted measures to ensure that all clients have access to a wide range of deposits and other substitute financial products.
Among them, he cites “promoting public-private partnership for areas at risk of financial exclusion.” The CNMC explains that “in rural or low-population areas, situations of monopoly or insufficient provision of banking services by the private sector could arise naturally.” Also, that “with the growing digitalization of the sector, the low density of bank offices could become an acute problem in certain geographical areas, causing problems of financial exclusion for households and, to a lesser extent, for some small companies.”
“In cases in which it is confirmed that there is a need that is not met either actually or potentially by the offer of operators present in the market, for reasons of general interest, intervention by the public sector may be justified, either through public-partnership approaches. private, or through direct provision solutions,” he argues. “As mentioned previously, some entities such as Correos have established collaboration agreements with several traditional credit institutions in recent years to ensure payment services in rural areas or with non-digital clients.”
Therefore, the CNMC believes that “in the future, it could be appropriate to extend these services to other financial services, including deposit products.” And it recommends “that these types of associations are not exclusive and, in any case, that they be carried out in the most pro-competitive way possible, through public contracting and grant-granting designs that stimulate competition.”
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