Publications

At the current stage, prospects of low levels of profitability for financial institutions are based on the first step of the income statement, on the interest margin. This work has concentrated on analysing the interest margin in the Spanish banking sector within the European context. Banks operate with very narrow interest margin in Europe. In fact, in the Eurozone, Germany, France and Italy, the mediation margin does not cover the operational costs of consolidated groups. The interest margin of consolidated groups in Spain has been systematically above the rest of the big countries of the Eurozone. This work quantifies the importance of different factors which determine the mediation margin through a simulation exercise. According to our results, the current situation of low interest rates is negatively affecting the interest margin as this is the factor of greatest influence. In these times when banking profitability is debatable, an increase in rates of interest would mean a lifeline for banks. It would enable them to face structural challenges under better conditions. However, bearing in mind that available indicators do not cause us to think that the ECB is going to implement a radically distinct monetary policy with rapid rises in rates of interest in the short term, the challenge of increasing profitability within a context of low rates of rates will continue. In this respect three elements are essential: containing costs and improvements in efficiency which allow results to be improved even with current rates of interest, the ability to generate income other than interest and on-going improvement in the macroeconomic situation to allow that share of the result deducted through commission to continue to be reduced.

Cruz, P. and J. Fernández de Guevara (2017): “Efecto de las medidas del BCE sobre los márgenes de intereses en España”, Mediterráneo Económico, 29, March, pp. 151-170.