Luis de guindos believes that the restructuring process of the savings banks has to be used to reduce capacity and increase solvency

Luis de Guindos, head of the financial sector for the consultancy firm PricewaterhouseCoopers and former State Secretary for the Economy, believes that the savings banks should take advantage of the restructuring process in the financial system to “reduce capacity and increase solvency”. He was speaking during the Aula Internacional de Empresa educational business conference organized by Universidad Europea de Madrid’s IEDE Business School. The subject was “The current outlook for the economic and financial situation”. In his opinion, Spanish banks are facing three challenges: “bad debts, narrowing margins and falling activity”. The consequences of this is around 30 per cent of excess capacity and capital requirements of between 20 billion and 70 billion euros, to be supplied by the Fund for Orderly Bank Restructuring (FROB).

In his presentation of the international and Spanish economic situation, Luis de Guindos suggested that the economic deterioration would slow down in Spain, although it may take longer to emerge from the crisis than for other similar European countries. “Indeed, the IMF still has estimated negative GDP growth (of -0.7 per cent) for 2010", he pointed out.

He himself considered that “the worst has passed”, although he doubted the strength of the recovery. He claimed that Spain has to face a complicated market scenario due to the budget crisis, the restructuring of the banking sector and the credit squeeze. In addition, he pointed out that the rise in taxes could affect the country's recovery from the crisis. However, despite the negative effects of the crisis in Spain, he indicated that there had been positive aspects, such as the fall in inflation and interest rates and the correction of the foreign deficit.

César Herrero, Legal Director of the Financial and Banking law department of the Madrid office of the international law firm DLA Piper, believed that the Spanish financial sector in general was still not very active. “We have not fully overcome the liquidity crisis. There are not many financial institutions prepared to participate in new transactions and most of them are currently more focused on managing their asset portfolios," he explained.

Javier Lezcano, Managing Director of IEDE Business School, stressed that the crisis was affecting all levels of the economy, “from macroeconomic variables to decisions by small investors. This is why as educators of professionals, IEDE Business School considers it essential to promote encounters such as the Aula Internacional de Empresa that provide a forum for debate between professionals from different backgrounds."

Restructuring the financial system
César Herrero agreed with this when he pointed out that it seems fairly likely that the sector will take longer to emerge from the crisis in Spain than in most European countries, basically because “the restructuring of the financial system always takes time and measures were not taken so swiftly here as in other countries such as the United Kingdom.

He also considered that this stage of the crisis is a good time to improve banking supervision and reconsider some risk criteria that have been demonstrated not to be fully effective in practice.

Excessive fees
At the level of the small investor, Enrique Martí, director of CMC Markets España, explained that the crisis had led to a certain amount of disenchantment among small investors with products offering management and advice, as well as with private banking. “Our daily contact with retail customers confirms the growing demand by investors for managing their money themselves. He stressed that the Internet, combined with a greater financial culture among customers, has represented a turning point in the industry, as it has "eliminated barriers to access for small investors and today allows them to invest directly worldwide and with low fees in markets such as shares, commodities or foreign currency Furthermore this is easy to do and they provide the same guarantees as those offered by the Spanish market.

From his professional experience, there are two sides to all situations: "What is negative for some assets at a given time is positive for others, so we have to take advantage of this access to a global financial market to optimize investments”, he advised.