De Guindos announces that banks can start competing for deposits and improve their profitability by needing liquidity

Vice President of the European Central Bank (ECB) Luis de Guindosannounced this Monday the news that Spanish depositors have been waiting for two years: banks will begin to compete for grab deposits given the end of excess liquidity that existed in the system. It means that will increase interest what do they offer for deposits as a claim to attract new clients.

The move represents a reversal for Spain’s big banks, which have refused to increase fees on their fixed terms as the European Bank raised interest rates. Despite the stinginess of the big banks, Spanish depositors remained committed to deposits, and at the end of April they had more one billion eurosaccording to the latest data from the Bank of Spain, what they get for interest rate averages 2.49%.

During his speech at a seminar organized by the Association of Economic Information Journalists (APIE) and the International University of Menendez Pelayo (UIMP), de Guindos recalled that the ECB had several times asked banks compensate for obligations to correctly transmit the rate increase.

And that’s when the guardian of the euro lower interest rates – the price of money fell a quarter point to 4.25% in June – when the big banks start raising fees for their fixed terms.

Number two at the ECB pointed out that there are two explanations to explain this immobility of banks: “The structure of the market, what exists oligopolistic situationand one more, which seems to me to be of greatest importance in this case, is excess liquidity it was in a system that arose from the bond purchase transactions that we take out. Or the famous TLTRO.”

De Guindos admitted that certain changes have taken place, such as transfer of demand savings to term productsbut reiterated that banks “didn’t need to” compete for rewards on demand deposits, given their high liquidity. ECB leavestightening TLTRO conditions or limiting reinvestment.

“This will lead, from our point of view, to the fact that more competition and that banks are starting to compete more for deposits, including demand savings,” he indicated.

And the lack of competition in deposit remuneration is one of the arguments that the Spanish government uses to demonstrate its disagreement with hostile takeover bid than BBVA launched on Sabadell Bank, although Luis de Guindos, as was his wont, avoided commenting on the matter.

Regarding the process of reviewing the takeover proposal and its approval by the ECB, De Guindos said that the institution intends to consider the operation on the basis prudential and solvency criteria. He indicated that he has 60 days to respond to the request for approval, which can be extended by another 30.

He admitted that the ECB “in favor of cross-border mergers to create European banks and that the banking union is not complete due to the lack of elements, for example, a single deposit guarantee fund or “pan-European” banks. “We want European banks, not national banks with certain operations in other countries in the European zone,” he said.