The second (failed) courtship attempt in four years between BBVA and Banco Sabadell has put on the table the “possible beginning of a new stage of mergers between entities in the Spanish financial market”, according to experts, and the consequent approximation to the red line of banking concentration set by the European Central Bank (ECB).

The 2008 financial crisis was the trigger for a process of thinning of the Spanish financial system, with the disappearance of savings banks and their absorption by banks. In 2010, the first major movement of mergers between financial entities began: 13 operations were registered involving 35 banks and savings banks. Between 2011 and 2013, another 12 mergers were carried out, giving rise to the banking map we have today.

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To fallback.

Thus, from 55 banks and savings banks that made up the financial system in 2009, it has grown to 11 entities at the beginning of this decade. The latest major integrations have been that of Caixabank and Bankia, and that of Unicaja with Liberbank. The merger of BBVA with Banco Sabadell, twice frustrated, would have given rise to the third banking power in Europe, with an equally powerful systemic risk for the Spanish State. Experts continue to predict that this will not be the last episode of mergers that awaits us, and that the trend towards concentration will continue to gain ground.

The ECB measures the level of banking concentration based on the Herfindahl and Hirschman index, used by the world's main competition organizations to analyze the situation of a market and approve or not approve merger operations. A maximum value of 10,000 implies a monopoly. As a general rule, the ECB estimates that a level below 1,000 represents a low concentration, a level between 1,000 and 1,800 is considered a medium concentration, and above 1,800 a high concentration. If the BBVA-Sabadell merger had gone ahead, Spain would have reached levels around 1,600, a figure that is already close to the beginning of the red concentration zone at the ECB traffic light.

Banking concentration translates into a decrease in competition in the banking market. As there are fewer financial institutions, citizens have fewer options to choose from, limiting the possibilities of finding more advantageous conditions to work with their money.

Fewer bank offices and fewer jobs

Banking concentration is positive for financial institutions; Because they earn more, they generate synergies to improve their products and services, they are stronger in the banking market and are freed from competition. However, this concentration is not positive for citizens, both clients and users, because there is less capacity to choose, it has a negative impact on the labor market due to the reduction of jobs and, in addition, it increases the risk of exclusion. financial in certain areas of Spain.

Since the wave of mergers in Spain after the financial crisis, the number of bank offices and ATMs has been drastically reduced: the number of ATMs available for citizen service has been reduced by more than 22%, from 61,000 to 40,000 (that is, the disappearance of one in five ATMs); Bank branches have experienced a sharp cut as a result of mergers between banks, going from 46,000 branches in 2008 to 20,000 currently.

The Association of Consumers and Users of Banks, Savings Banks, Financial and Insurance Products (ADICAE) affirms that the banking monopoly slows down the remuneration of savings, reduces staff and eliminates services. For this reason, sources from the association consider that, if there is a new merger attempt in the future, “Banco Sabadell workers (like those of any entity) will be affected because there will be a reduction in staff, and consumers will lose services.” Furthermore, he fears that the conditions of the staff contracts could be “unilaterally changed” and that there will be an increase in commissions in a context similar to the one experienced.

In this new scenario of banking concentration, “people over 65 years of age will once again be the most affected users,” the association says. Mainly due to the reduction of services provided by large banking entities in terms of customer service, due to the closure of branches and reduction of customer service staff, in favor of an increasingly greater digitalization of banking transactions and operations. In 2014 in Spain there were 276,497 banking employees, according to data from the Bank of Spain. Currently, there are just over 160,000, which means that one in every three workers has been laid off in the last decade.

The danger of banking concentration for citizens
The second vice president of the Government and Minister of Labor and Social Economy, Yolanda Díaz, has expressed “a lot of concern” about the possible merger between BBVA and Banco Sabadell and warns of the “systemic risk” that this operation would imply, if it comes to fruition. She stressed that banking concentration in Spain today is around 40% and emphasizes that Spanish banking entities “are already functioning as a true oligopoly.”

The president of the Generalitat, and ERC candidate in the Catalan elections, also did not view favorably the absorption of Sabadell by BBVA and advocated that Catalonia have more supply of financial entities because a concentration “could go against access to credit of Catalan companies”. From the other political side, the Valencian president, Carlos Mazón (PP), has publicly shown his “concern” about the now frustrated bank merger, because it is “not good news” for competition in the banking market.
Have bigger banks. That is the aspiration of the European Central Bank. An idea that has been encouraged in recent times by its vice president, Luis de Guindos, and that is not exempt from critical voices who consider it “madness” to create banking entities with the systemic risk that they entail for the States.

In this scenario of concentration and systemic risk, faced with a future financial crisis “which there will be,” says economist Carlos Sánchez Mato, the State will have “serious difficulties” in carrying out a bank rescue like the one in 2012, and “it will cost us much more expensive for citizens,” says the economist. The axis of the problem lies in the deposits (people's savings) that each of the banking entities have, and which are protected by the guarantee system of the Spanish State which, according to the latest balance sheet published a week ago, has 8,700 millions. “The State is guaranteeing these deposits (100,000 euros for each citizen) and we do not have the resources to face a possible bankruptcy of the banks,” recalls the economist; in fact, this guarantee “does not even appear as public debt,” he adds.

Banking entities concentrate because they earn an insufficient amount of money, and at the same time that we are seeing record profit figures “as a result of monetary policy decisions of the Central Banks, and not of good management of the business itself”, we have “They have to divide those profits by the assets they have to mobilize to achieve those results” explains Sánchez Mato. This mathematical exercise results in “1% profit on the assets, and this is much less than what investors require from the “It's time to demand profitability,” says the economist. Faced with this situation, the banks decide to concentrate.

Spanish banking is “hyperconcentrated.” Between the 5 main banking entities they have approximately 74% of the loans and savings of the country's citizens “and this is a lot” emphasizes the economist. Another data to take into account is the concentration of these entities in the different geographical points of Spain. “In the cities there is a greater banking offer, but the same does not happen in smaller areas, such as the province of Teruel, where the indicators that the ECB itself considers logical in terms of banking concentration are broken,” explains Sánchez Mato. A situation that “clearly puts citizens at a disadvantage” compared to banks.

ADICAE has also expressed on numerous occasions its concern regarding the high concentration of the sector, especially after “the numerous mergers that took place after the rescue of the Spanish banking system.” A concentration that “has erased from the map the supposed competition that should prevail in the free market” and, in the opinion of this association, “has clearly harmed consumers' savings” in what the association has already defined as “a clear oligopolistic movement.” of the sector” point out their sources.
Both Carlos Sánchez Mato and ADICAE recall that the rescue of the Spanish banks was carried out with public money, and that “some 40,000 million euros of that rescue have still not been returned.”

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