Intervention at the XXIV Meeting of the Financial Sector

José María Méndez: “The Spanish banking system continues to maintain profitability levels above the EU average”

The General Director of CECA highlighted that “the tax contribution of CECA entities amounted to 4.866 billion euros in 2016”

CECA affiliated entities continue to be the largest private social investor in Spain, having allocated over 734 million euros in 2016 to improve the well-being of citizens

The General Director of CECA, José María Méndez, participated today in the XXIV Meeting of the Financial Sector, where he analyzed the economic and financial context in which banking entities operate, as well as the regulatory and digital transformation challenges faced by the banking sector.

Despite the context of low interest rates, moderate credit growth, and increasing regulatory pressure, the Spanish banking system continues to maintain a ROE higher than the EU average (7% vs. 5%).

Although new financing granted to households and SMEs has continued to increase, the credit balance to the private sector across all deposit-taking entities has decreased by -2.8% year-on-year, indicating the profound deleveraging process we are still undergoing. Deposits closed the year 2016 with a 3.2% increase. Meanwhile, off-balance resources have begun to show a moderately increasing trend from July, and a growth in retirement savings products is expected in 2017.

Contribution of CECA affiliated entities

Regarding social activity, CECA affiliated entities remain the largest private social investor in Spain, having allocated more than 734 million euros in 2016 to improve citizens’ well-being, which represents a 2.3 percent increase compared to 2015. This investment has enabled 100,000 activities benefiting more than 31 million people.

Méndez emphasized: “The recovery of the sector allows reinforcing one of its identifying features, the Social Work, which is now carried out through Banking Foundations.”

Méndez referred to the report prepared on the tax contribution of the CECA sector, which concludes that in 2016 the contribution of CECA affiliates (40% of the Spanish banking system) amounted to 4.866 billion euros, of which 2.255 billion corresponded to taxes borne and 2.611 billion to taxes collected. During the
2016 fiscal year, the total tax rate of the CECA sector reached 38 percent. That is, for every 100 euros of profit before borne taxes, 38 euros were allocated to tax payments.

CECA affiliated entities are characterized by their activities related to families and Spanish companies, so as highlighted by the General Director, “they only have risk in Spain, hence the importance of their tax contribution.”

Challenges of the financial sector

José María Méndez reviewed the main challenges facing the banking sector. Within the regulatory agenda, he pointed out the importance of completing the rollout of the Banking Union, for which the establishment of a Single Deposit Guarantee Fund is still pending. He also highlighted the regulatory challenges including the entry into force in 2018 of the IFRS 9 provision calculation standard, the amendment of the Payment Services Directive (PSD 2), the enactment of MIFID 2, and the transposition of the mortgage credit directive.

The bulk of regulatory challenges arises from the European level, which is why, “for us, it is so relevant to hold the Presidency of the ESBG (European Savings Banks Group) through our president Isidro Fainé, who is now entering his second year of office,” Méndez emphasized.

Digital transformation is another area greatly affecting the strategy of financial entities. “To track these trends -the Director pointed out- FUNCAS has launched a Financial Digitalization Observatory,” which analyzes the profile of the digital customer.

In this context, Cecabank, as a wholesale bank specialized in providing Financial Services, Treasury, and Securities Services, is in an ideal position to contribute to the adaptation of the financial sector to this new reality.