Alberto Aza: ‘The Decree Tax Prevents the Banking Sector from Negotiating It’

Alberto Aza, spokesperson for CECA, addresses issues linked to the Government’s intention to establish the temporary levy on the banking sector as permanent in ON ECONOMÍA.

Interest rates have decreased three times since June; is it time to abolish the tax on banks?
Our position has not changed; from the beginning, we have expressed a firm rejection of the tax because it has a negative impact on credit and the economy. Furthermore, it is incongruent because it taxes income instead of profits, and therefore, does not take into account profitability. We still think the same. It is under appeal, and we have a scenario of two or three years until the courts make a ruling.

However, the government wants to make it permanent. If that is the case, do you demand to negotiate it?
The incorporation of the tax into our legal system would be through a royal decree or, alternatively, through an amendment to the articles of a bill currently under consideration in Congress. These options diminish the quality of public debate and prevent the banking sector from expressing its position on regulations that affect its activities.

Can the banking sector stop the tax?
At CECA, we will continue to defend the interests of our member entities and express our strong rejection of the tax. Taxing banking activity permanently negatively affects the economy and employment, with an estimated loss of 50 billion euros in the banking sector’s financing capacity. Additionally, we would be the only European jurisdiction with such a tax, placing Spanish banks at a clear competitive disadvantage. It is also worth noting that the circumstances today are not the same as those that led the Government to justify the tax: back then, interest rates were rising rapidly, and today we are on a path of rate cuts.

Has the tax caused banks to provide less credit?
The tax has clearly impacted the profitability of companies and their creditworthiness. It has had an impact, but in the current context, we have seen a reactivation of credit due to interest rates.

In addition to the tax, there is considerable attention on the BBVA-Sabadell takeover bid. Is there still room for consolidation?
The level of banking consolidation in Spain is slightly above the European average. In reality, the pending issue is cross-border operations, which face regulatory difficulties due to the divergence between different countries. Therefore, the important thing is that we can advance in banking union because it would be the way to create large European banks capable of competing internationally.

So, is there no room for more mergers in Spain?
I believe that the concentration of the banking sector in recent years has been intense and beneficial for institutions and clients. Today, entities are stronger, more profitable, more solvent, and more resilient. Competition has, in fact, increased rather than decreased. Greater concentration in an industry does not necessarily imply reduced competition. I believe the Spanish banking sector is a clear example of this.

But the Bank of Spain is studying together with the CNMC why deposits have not been remunerated…
With deposits, there has been a particular characteristic of the Spanish banking sector in the past and current year, which is the excess liquidity that approaches historical records. This means there is less need to rely on deposits. However, the data we have shows that deposits for 1 and 2 years for families and businesses are above the average remuneration of deposits in Europe.

And with interest rates falling, have the record profits come to an end?
The forecast is that the results for 2024 will exceed those of 2023, but it is also true that profit growth is moderating, influenced by interest rates and the tightening of margins. We expect to hit a ceiling in 2025.

There is a significant reactivation of mortgages, but also of consumer credit, should this concern institutions?
Household debt levels are adequate and manageable, especially after many loans were repaid early, particularly mortgages, in the last two years. We are in a correct situation, and we are not concerned about the demand for credit because it had been heavily burdened in recent years by the environment of rising interest rates.

In recent years, banks have improved profitability and efficiency, partly through branch closings and personnel adjustments. Will we see more?
For now, we do not believe there will be further adjustments. The efforts of institutions in recent years to optimize their capacity have translated into efficiency gains that are fundamental for defending profitability. Therefore, it is being confirmed that this optimization has been beneficial for institutions.

Some believe that banks overreacted. In fact, the Government had to force banks to find solutions for the elderly and in rural areas. Has there been progress in this regard?
In February 2022, we launched a ten-point plan to improve service for the elderly that requires more delicate attention, and the results are very positive. In satisfaction surveys, 92% feel safe and autonomous when operating. Regarding rural areas, the initial goal was very ambitious. Achieving 100% physical access to financial services in all Spanish municipalities speaks to total financial inclusion, and I doubt any country can claim that. Currently, the advances are very significant. The population residing today in a municipality that has physical access to financial services is 99.1%.

Meanwhile, progress is being made on solutions like the digital euro; how long will it take to arrive?
The digital euro progressed in the previous European legislature during its preparation phase. However, it stagnated in the legislative phase, and we have to wait to see the appetite of the new Commission and Parliament to see if they will push this project forward. We believe it could impact the banking sector, and therefore, it is important to limit holdings of the digital euro to low amounts to ensure that its function is transactional rather than for investment or savings.

Digitalization is advancing, but some lack sufficient information about certain products. How is our financial education?
All surveys conducted in Spain highlight that financial knowledge in Spain is deficient; we fail. The latest Eurobarometer ranked Spain fourth from the bottom. Hence, for the banking sector, this is a priority issue.

What measures is CECA taking?
CECA has been committed for a long time. Since 2018, in this six-year period, we have invested 18 million euros in financial education programs, making us the largest investor in the country. However, there is much to be done because we face a structural challenge in our country, requiring extensive actions. One pending issue is to include financial education in school curricula from early ages throughout the entire educational cycle. That will lead to adults with adequate knowledge.