The Differential Characteristics of the Financial Sector

After a long period of crisis, the restructuring of the financial sector and the new regulatory requirements have reinforced the position of our entities, which now enjoy healthier balance sheets, solid liquidity and solvency ratios, and a greater capacity to withstand potential risks. However, the banking sector that emerges after the financial crisis faces conditions that did not exist in the previous period, compelling us to reflect on the adjustment of the current business model to this new environment. The first significant challenge facing the sector is undoubtedly profitability in an environment of unusually low (zero or negative) interest rates and stagnant volumes. This scenario significantly hinders margin generation under traditional operations and poses a particularly relevant threat to Spanish entities due to their high exposure to retail loans and variable-rate mortgages. Added to this complex new macroeconomic environment is the emergence of the new European regulatory and supervisory model, which implies the adoption of stricter regulations, especially regarding capital, leverage, and liquidity requirements, and places additional pressure on banks to achieve adequate profitability levels and increase credit lending to the private sector. Finally, entities face the major challenge of the digital revolution and how to respond to disruptive technological changes.

On one hand, digitalization presents opportunities to be closer to our clients, to know them even better, and to offer them more personalized and specialized services. However, it also carries threats such as the emergence of new financial service providers and payment channels associated with companies outside the conventional banking sector. Entities must confront this competition and ensure that the new operators offer their services within an appropriate regulatory framework that guarantees customer rights and balanced competition. In this context, if anything seems certain, it is that this new environment of increased competition and low interest rates will persist in the near future. Entities find themselves needing to adapt their business models to maintain sustainable levels of profitability that cover the cost of raising capital and generate greater attractiveness for investors.

Additionally, entities must persevere in their efforts to improve efficiency—reducing costs and focusing efforts on value-added tasks—but also, undoubtedly, in providing a new client experience—both retail and professional—supported by new technologies and without losing sight of delivering personalized service. The new MiFID 2 regulation establishes that entities must enhance the training of their staff in the area of financial advice: let us turn this regulatory requirement into an opportunity and commit to offering our clients high-quality multichannel advice that highlights the differential characteristics of financial entities and, in particular, their deep knowledge of financial markets in light of the emergence of new competitors.