Banking | Big banks receive 7 billion in public money and pay a thousand million in bank tax – El Salto

The rain of extraordinary profits for the big Spanish banks is far from over. In 2023, the Big Five earned €38.922 million, a previously unheard-of figure. And these results threaten to be repeated and even increased in 2024. In the first three months of this year, BBVA made a profit of 2,200 million euros, 19% more than in the same period in 2023, a year considered a miracle for Spanish banks. despite the widely criticized income tax. Caixabank announced on April 30 that it earned $1.005 million in the first quarter of 2024, up 17% year-on-year. Santander, the first Spanish bank, did not stand aside: it earned 2.852 million in the first quarter, which is 11% more than in 2023. In Spain, it improved its earnings by 65% ​​compared to the same period last year. .

In the economic region of Zumara, led by deputy Carlos Martín Urriza, they reject the fact that this increase in extraordinary profits is due to “better management” or an increase in the number of loans issued, which did not happen. They point in a completely different direction: record profits are nothing more than “profits falling from the sky” – or, more accurately, falling “out of the pockets of households and taxpayers” – caused by rising European Central Bank interest rates. Bank (ECB) from 2022.

This rise in money prices, theoretically designed to curb inflation, has opened up various business opportunities for financial institutions in a banking market with little regulation that functions as an oligopolistic “cartel,” as Martín Urriza explained to El Salto.

In 2023, the return on deposits of financial institutions at the Bank of Spain resulted in 7.860 million euros in profit for large Spanish banks.

Among these business opportunities, the report prepared by the trade unionist and economist’s team highlights a “transfer from public coffers to banks” of €7.860 million in 2023.

The high interest rates offered by the ECB to private financial institutions (they rose from figures close to 0% for a decade, to 2% in January 2023 and 4% in September the same year) forced large banks to turn to all of Europe to place their deposits in these national central banks, where private users are prohibited from entering.

During 2023, the return on these deposits translated into €7.860 million in profit for large Spanish banks. The money that the Bank of Spain (BdE) transferred as interest to large Spanish banks in 2023 was six times higher than in 2022. This figure also represents 6.5 times more money than what the state received in taxes on banks, about 1214 million in 2023. According to Sumar, this shift from BdE to private banks has serious consequences for the state’s assets, as it “reduces government revenues.”

The Origin of Record Profits

The transfer of public money from the BdE to the big banks explains only part of the extraordinary profits of Santander, BBVA, CaixaBank, Bankinter and Sabadell since 2022.

The ECB’s interest rate hikes presented a unique opportunity: the context allows banks to make high profits on the money they provide in the form of loans and mortgages, while no legislation forces them to increase the rewards they offer their customers for doing so. money has been deposited.

A four-point increase in the Euribor rate allowed banks to receive on average 300 euros more per month – about 3,600 euros per year – for each mortgaged house. And all this in a country where 70% of mortgages are regulated by variable loans linked to Euribor.

A four-point increase in the Euribor rate allowed banks to receive on average 300 euros more per month for each mortgaged home in a country where 70% of mortgages are variable.

The so-called interest margin made the rest of the magic happen: While financial institutions offered an average of 0.15% to families and 0.70% to businesses on their current deposits in 2023, they charged more than 8% on the money they lent them. According to BdE.

The temporary bank tax attempts to contain this income that has fallen out of the pockets of the Spanish population, but, as data shows, on a limited scale. This tax, in addition to fees, is levied on 4.8% of the income received from this interest margin.

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The transfer of public money to banks, thanks to high official interest rates offered by the ECB and national central banks, had already come under criticism in January when a group of economists and members of the European Parliament condemned the shop’s “extraordinary profits”. They condemned the “disparity” between the high deposit yields that central banks offer to financial institutions and the meager rates they provide to individuals “not only undermines public confidence in the ECB’s monetary policy, but also deepens the rift.” between the financial sector and the general public. Not forgetting, of course, that the losses caused by these transfers become public debt. According to this report, in 2023 alone the ECB transferred a total of €146 billion to European private banks through this mechanism.

This group of experts, led by Belgian economist Paul De Grauw, then proposed a number of measures to solve the problem, including increasing to 10% the minimum outstanding reserves of banks at the ECB. A recommendation with which the governors of the central banks of Germany and Austria agree, but whose powers extend beyond Spain.

In 2023 alone, the ECB transferred a total of €146 billion to European private banks through this mechanism, equivalent to the EU’s total budget.

Another way to “return to society the extraordinary benefits of banking” brought about by rising rates would be to increase the capital buffers of financial institutions. On April 28 this year, the Soumara parliamentary group presented an initiative in this regard, a solution that depends, as they say, on the Financial Stability Council of the Macroprudential Authority (AMCESFI), which will circumvent the complex network of economic forces of the European financial system. .

The non-legal proposal aims to reduce government transfers to banks, they defend in the legislative text, and ensure the stability of the financial system in the face of “the existing imbalance between the levels of reserves and profits.” According to the text, the capital reserve must be increased by the same percentage as the extraordinary profits received by banks from their deposits in the BdE. There are currently five types of capital buffers. Among them, the systemic risk buffer or countercyclical buffer is expected to rise the most, the Sumar report argues.

In this illegal proposal, Sumar also asks for a guarantee of transparency from the Bank of Spain regarding transfers of public money to banking institutions that enjoy high interest rates.

In addition to raising capital buffers, Sumar defended in the report making the bank tax permanent, pressure on the ECB to cut interest rates, limit dividend distributions and prevent share buybacks, and how to increase the mandatory outstanding amount. reserves that banks hold with the ECB.