The Bank of Spain will penalize entities do & prime; dumping & prime; with credit – EntornoInteligente

Expand / The price war waged credit banks to gain or maintain market share concerned supervisors, both the ECB and the Bank of Spain, for its effect on profitability.

To end the war, the institution headed by Luis Maria Linde penalize entities providing loans too cheap.

Banks that give loans with a price too low not cover the costs or the risk involved in the operation should directly assume an expense on their income statements, as contained in the draft amendment of Annex IX of the accounting circular has been in public consultation until 19 February.

the Bank of Spain seeks the pricing policy of banks cover at least the costs of financing, structure and risk inherent in each transaction credit and do not want to compute aspects are taken into account as customer loyalty .

“the granting of an operating below its evidence that the transaction price differs from fair value cost. in this case, the operation granted must be initially recorded at fair value, of so that the difference between this and the amount drawn is immediately recognized as an expense in the income statement, “says the new annex. “For the purposes of this calculation, not income or expense savings from other cross-holder operations include”.

The initiative of the Bank of Spain has roused banks, first , defend the need to analyze operations based on the overall relationship is maintained with the client and not individually. “Maybe an operation in itself is not profitable, but it is a good customer that the bank wants to keep” explain industry sources.

Second, banks ask the supervisor more definition in terms of the costs to be taken into account, whether interest rates, consumption of capital or any administrative expenses to be included, such as the salaries of office workers. “We need more detail to all entities know what costs computing,” said an expert who knows the draft.

Meetings with banks The Bank of Spain has begun a round of meetings with banks to allegations he has received. Some remain hopeful that the supervisor assess the possibility to modify the initiative and even to withdraw it. “It’s too hard and subjective,” say from a listed bank. In any case, the bank has requested that the entry be postponed into force of the measure, the date originally scheduled, on June 30, 2016, to December.

The Bank of Spain has spent months investigating the credit price war to take the necessary measures in order to ensure that the business models of entities are sustainable in the medium and long term. This is one of the priorities it has set the single supervisory mechanism (MUS) of the ECB for this year, before the difficult operating environment created by the ultra loose monetary policy in the eurozone.

Lowering prices credit and relaxation of standards concession are a common denominator in European banks, but are especially important in Spain, according to the results of the latest survey of bank lending the ECB, which analyzes the situation in Spain, Italy, France , Germany and the Netherlands.

the Spanish banking is the most credit applications by companies accepted among the top five countries of Europe and highlighted by the narrowing of margins on lending to companies. In addition, Spain is the only geography that has not increased the demand for credit to companies.

As prices of credit to SMEs, object of desire of all banks, the average interest rate loans to these companies -for less than one million euros amount dropped to 3.12% in February from 3.28% in January marking, approaching the record low of 3% in that closed 2015, according to statistics ECB.

for the first quarter of 2016 survey also reflects how in both Spain have relaxed credit standards to households -the minimum requirements accessories as the conditions of these loans due to lower risk perception by the entities.

the Bank of Spain will penalize entities do ‘dumping’ with credit

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