After a long period of crisis, the restructuring of the financial sector and the new regulatory requirements have strengthened the position of our entities, which now enjoy healthier balance sheets, solid liquidity and solvency ratios and greater resistance to potential risks. However, the banking sector emerging in the wake of the financial crisis faces constraints that did not exist in the previous period, and which force us to reflect on the current business model's adaptation to this new environment. The first major challenge facing the sector is undoubtedly the issue of profitability in an environment of unusually low (zero or negative) rates and stagnant volumes. This scenario makes it very difficult to generate margins through traditional transactions and represents a particularly relevant threat for Spanish entities given their high exposure to retail loans and variable rate mortgages. In addition to this new complex macroeconomic environment, there is the emergence of the new European regulatory and supervisory model, which implies the adoption of stricter regulation, especially in terms of capital, leverage and liquidity requirements, and puts additional pressure on banks to obtain adequate levels of profitability and increase lending to the private sector. Finally, entities face the major challenge of the digital revolution, and how to respond to disruptive technological changes.
On the one hand, digitalisation presents opportunities to be closer to our customers, to get to know them even better and to offer them a more personalised and specialised service, but it also entails threats such as the emergence of new financial service providers and payment channels associated with companies outside the conventional banking sector. Entities must address this competition and ensure that new operators offer their services within an appropriate regulatory framework, which guarantees customers' rights and a balanced competition. In this context, if one thing seems certain, it is that this new environment of increased competition and low interest rates will persist for the foreseeable future. Entities are faced with the need to adapt their business models to maintain sustainable levels of profitability, which allow them to cover the cost of raising capital and generate greater attractiveness for investors.
In addition, entities must persevere in their efforts to improve efficiency - reducing costs and focusing efforts on value-added tasks - but also, undoubtedly, in offering a new customer experience - both retail and professional - supported by new technologies and without losing sight of the need to provide a personalised service. The new MiFID 2 regulation stipulates that entities must reinforce the training of their staff in financial advice: let us turn this regulatory requirement into an opportunity and strive to offer our customers multi-channel advice of the highest quality, which highlights the distinguishing characteristics of financial institutions and, in particular, their in-depth knowledge of the financial markets in the face of the emergence of new competitors.
