This Week's Focus: The end of traditional banking in Spain
Friday, 23 of September 2016
This week focus
The example of Banco Popular
The announcement of nearly 3,000 layoffs and the closure of 300 branches by the People's Bank have highlighted the crisis in the Spanish banking model of the past 40 years. In the 70s and 80s, the territorial expansion of banks and savings banks, through continued opening of branches and recruitment, enabled growth and increased profits in the financial sector, while Spain lived a growing banking.
The financial crisis that began in 2008, coupled with the bursting of the housing bubble, have accelerated the reorganization and rationalization of the financial sector is Spain, including the traumatic disappearance of almost all the savings banks.
The urgent conversion
Problems common to all members of the banking sector passing through a structure of high costs, mainly due to the number of branches, many of them of a size that hinder their financial viability with service standards acceptable to the customer, and personnel costs disproportionate due to the excessive size of the templates after outsourcing and computerization of most operating procedures.
Moreover, digitization of financial services has been challenged by the growth model extension branches, exacerbating the problem of structural oversizing of banks and savings banks. The ability to provide the most services and online banking operations, has rendered obsolete the traditional bank branch, so today has more sense the concentration of specialized services in a few offices. This represents an excess branches on which decisions are required closing. Since the beginning of the crisis, nearly 15,000 branches have disappeared, one third of the total.
The cost of dismissal and poor social image of a sector with huge benefits firing crowd of workers have deferred the necessary adjustment template over time, until the circumstances of economic viability have left no choice. Mergers between entities have facilitated the adjustment and the sector has lost more than 70,000 jobs, almost all permanent contracts.
Unviable entities without commissions
The decreasing level of interest rates, due to the reaction of central banks after the outbreak of the financial crisis and the reduction of bank credit, are behind the steady decline in basic income or interest margin, the main activity of entities financial.
On the contrary, the commissions have been equilibrating in part the fall in net interest income, and accounted for the entire industry revenue of more than 16,600 million euros in 2015, of which 5,200 million corresponded to services receipts and payments and services values.
Commissions on marketing of products, according to official figures from the Bank of Spain, have increased dramatically over the past five years, from just over 3,000 million euros in 2011 to over 4,200 million euros in 2015. This figure represents more 40% of income before taxes in the sector in 2015.
The future of the sector, it appears that has a clear though painful way: lighter structures and increased weight of product marketing in times of increased information transparency and investor protection.
All under the threat of companies Fintech, which are carrying out a continuous and increasing encroachment in the financial sector thanks to technology and the possibility of disintermediation without slab of reputational discredit many entities crawl since the outbreak of the crisis because of preferential clauses soil, structured products and abusive conditions. Quite a challenge.