IMF urges mergers because 15% of European banking “is not viable” – Economíahoy.mx

C. Triana / E. Contreras madrid. – 23:00 – 27/05/2016

• Viñals alert insufficient return of 40% of financial institutions

Mergers, strong divestments of non-performing assets, business model restatements and adjustments. European banking looks set to a reconversion to leave, if not graceful, at least survivor of an unprecedented storm formed by the nefarious coincidence of an economic slowdown, with negative types, too many toxic assets and the mattress extraordinary almost fleeced after eight years . crisis

in the eyes of the authorities with influence in the -BCE sector Single Supervisory Mechanism (Mus) or EBA (European banking authority, for its acronym in English) – the road passes, inexorablamente , to accommodate the structure to lower cake business, ie take fusions. The latest was yesterday urging the International Monetary Fund (IMF). Your financial director of monetary affairs and markets capital, José Viñals, believes that the inability of banks to obtain profitability boost integration in the euro zone.

In the “XXXII Meeting of the Economic Circle” , Viñals explained that one of the handicaps of the economy of the euro area is the status of your banking. According to IMF estimates, up to 30 percent of assets are not able to generate profit entities. “There are too many banks and too weak,” he said and predicted that some “must undertake very difficult adjustments in their business model.”

One third of the assets remains

According to the who was deputy governor of the Bank of Spain and ECB member before joining the IMF, is ahead of an inevitable process of restructuring, especially in Europe, because 40 percent of banks have not adapted to the new environment or regulatory or competition. Confident that an important part to transform, but acknowledged that 15 percent is not feasible.

As have repeated, almost like a matra in recent times, senior officials supervisory body in Spain and Europe, Viñals argues that mergers are a score and augo border integrations. Days ago it did in Madrid, Danièle Nouy, ​​president of the Single Supervisory Mechanism this year has put the focus on scrutinizing the viability of business models and debug the excessive burden of bad debts.

The hard crossroads that faces the sector has blown up a very unusual crossing reproaches where banking accuses the ECB to put them to limit the negative types and the supervisor claims that are necessary to reactivate a dependent economy and keeps them at bay delinquent customers giving oxygen debt.

Regardless of reality is stubborn disputes. With the waning demand for loans and a stage where it is not expected that the Euribor rises again in at least two years, revenues are in free fall and erodes the profitability imperative. Return on equity (Roe) is 4.4 percent on average in the EU, insufficient banking when capital cost verges on 8 and far from the two pre-crisis digits. This situation places the sector between the sword and the wall, as it is bound to attract equity capital to meet regulatory solvency requirements rising, but neither the business gives to cover such an effort and almost frightens the investor.

The scope for reverse is limited. Insurance, pension funds or plans have crept into the strategic priorities because they provide commissions and banks have started charging for certain servicios.La bet is risky because it annoys a customer used to receive free and hiring of the first products depends a still insufficient demand.

The downward spiral plays against type. According Afi, the Spanish banking system has lost 70 percent of financial revenues since 2008 with the collapse of Euribor and the withdrawal of ground clauses mortgage. And, despite the new RESTAMO, credit-in day to day business shrinks Spain have disappeared 600,000 million or nearly a third of the portfolio in 2008.

The posibililidad to go to the window of the ECB to take free money and monetize is minimal due to the insufficient credit and yields of fixed income at ground level. other drawers are also exhausted: most have monetized managing real estate, business cards and even insurance. The possibility of lowering the reservoir is also the limit -in Spain offered 0.29 percent for fresh money and 0.6 in Europe. On the other hand the high burden of arrears and foreclosed properties consumes resources without contributing anything.

War by the business

The difficult situation also encourages a war for the small business, with prices down to deepen the decline in margins between traditional institutions and, increasingly FinTech world rivals arrived and shadow banking. A cocktail that is pushing banks to seek, via savings, which fail to generate income with another twist in branch closures and layoffs. If the picture is perpetuated too long will actually mergers. Spain has undergone an intense process of consolidation, reducing a census of 60 entities to a dozen, but Europe is highly fragmented, with more than 5,000 entities.

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