spanish banking sector in the ssm context · 2016. 2. 11. · portfolio weight rwa relative saving...

SPANISH BANKING SECTOR IN THE SSM CONTEXT

Fernando Restoy

Deputy Governor, Banco de España

NINETEENTH ANNUAL EUROPEAN FINANCIALS CONFERENCE

GOLDMAN SACHS

Rome, 16 June 2015

OUTLINE

1. The current situation

1.1 The picture emerging from the comprehensive assessment in the euro zone

1.2 A note on Spain

2. Main challenges ahead

2.1 Profitability

2.2 Regulation

2

1. THE CURRENT SITUATION

1.1 The picture emerging from the comprehensive assessment in the euro zone

Moderate impact of the AQR on CET 1 ratio (42 bp for SSM banks on average) but with high heterogeneity among countries. On the day of publication of the results, only 13 banks with net capital shortfall.

Currently, most of them have already addressed capital needs

Spanish banks: The lowest impact of the AQR (14 bp) No capital shortfall at the time of publication of the results.

3


NET IMPACT ON CET1 RATIO OF THE AQR (a)

0,00,51,01,52,02,53,03,5

Gre

ec

eC

ypru

sS

love

nia

La

tvia

Est

on

iaP

ort

ug

al

Au

stri

aIt

aly

Ma

lta

Slo

vakia

Fin

lan

dB

elg

ium

Ne

the

rla

nd

sL

ith

ua

nia

Ave

rag

e S

SM

Ire

lan

dG

erm

an

yL

uxe

mb

ou

rgF

ran

ce

Sp

ain

pp

-2

0

2

4

6

8

10

12

Slo

ven

iaG

ree

ce

Be

lgiu

mIr

ela

nd

Ma

lta

Cyp

rus

Po

rtu

ga

lL

uxe

mb

ou

rgG

erm

an

yF

inla

nd

Ita

lyA

ust

ria

Ave

rag

e S

SM

Ne

the

rla

nd

sF

ran

ce

Slo

vaki

aL

ith

ua

nia

Sp

ain

La

tvia

Est

on

ia

NET IMPACT ON CET1 RATIO OF THE STRESS TEST IN

THE ADVERSE SCENARIO, BY COUNTRY (a)

pp

Source: ECB and Banco de España a. Net of tax effect.

Source: ECB and Banco de España a. Net of tax effect.

CA results

4


5 5

1.2 A note on Spain

1. The cleaning up process

2. Reestructuring

3. Recapitalisation


6 6

Clean-up

It includes loans to real estate and foreclosed assets.

0

50

100

150

200

250

300

2011 2012 2013 2014

BALANCE SHEET EXPOSURE TOREAL ESTATE SECTOR

(Net of provisions) €bn.


7

Reestructuring

NUMBER OF CREDIT INSTITUTIONS CONSOLIDATED GROUPS.

0

20

40

60

80

100

120

2007 2014

60

70

80

90

100

110

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

EMPLOYEES AND OFFICES (Dec08 = 100)

OFFICES EMPLOYEES

0,0%

2,0%

4,0%

6,0%

8,0%

10,0%

12,0%

14,0%

Phase-in Fully loaded

0

50.000

100.000

150.000

200.000

250.000

300.000

2008 2009 2010 2011 2012 2013 2014

Eligible Capital Reserves Capital + Reserves

8

CAPITAL EVOLUTION. SPANISH BANKING SECTOR Mill € CET1 2014

SPANISH BANKING SECTOR


Recapitalisation

2. MAIN CHALLENGES AHEAD

9

2.1. Profitability

Slowly improving thanks to lower impairments

-20

-15

-10

-5

0

5

10

15

20

2011 2012 2013 2014

ROE and components (%)

SSM significant institutions

Pre- impairment op.profit/Equity Net op. profit after impairment/Equity

Impairment/Equity RoE


10

SPAIN: EVOLUTION OF ROE

-30

-25

-20

-15

-10

-5

0

5

10

Dec-10 Dec-11 Dec-12 Dec-13 Dec-14

ROE ROE (excl. Results of Financial Operations)

2.1. Profitability

Significant variability across jurisdictions

-15

-10

-5

0

5

10

15

GR CY AT PT IT DE SI FR NL ES BE LU FI LV EE IE

RoE(%) 2014

SSM

11

0

20

40

60

80

ES PT NL SSMaverage

IT FR DE

EFFICIENCY RATIO. December 2014

%

0,00

0,20

0,40

0,60

0,80

1,00

1,20

ES FR PT IT DE BE GR IE (a)

UK (a)

NL

2001 2007 2010 2013

NUMBER OF OFFICES PER ONE THOUSAND INHABITANTS

Source: Financial Stability Report May,2015, Banco de España (a) Data refer to December 2012.


2.1. Profitability

Need to review business models and strategies

COST TO INCOME. December 2014

12

2.2 Regulation: issues on the ongoing international debate


Simplicity and Comparability:

Seeking an appropriate balance between simplicity, comparability and risk sensitivity, particularly relevant in the calculation of RWA.

The appropriateness of the use of internal models needs to be defined.

TLAC :

Having sufficient loss absorbing and recapitalization capacity to implement an orderly resolution that minimises impact on financial stability and taxpayers, and ensures continuity of critical functions.

Important to achieve neutrality between the different resolution models and consistency with MREL.

Simple, Transparent and Comparable Securitisations:

Reducing for this type of securitisations some of the conservatism built into the capital framework.

Relevant to bear in mind the role of securitisations as a risk transfer tool


2.2. Regulation: foster harmonisation across the SSM

In particular, harmonise solvency measures:

Capital definitions (national discretions)

Risk Weighted Assets

Basis for capital measurement (accounting)

13

14

TRANSITIONAL ADJUSTMENTS BY COUNTRY OF PARTICIPATING BANKS

As of 1 January 2014

Source: Aggregate Report on the Comprehensive Assessment ECB (October 2014)

-3

0

3

6

9

12

15

18

21G

R IE PT

AT

DE

BE ES IT NL

LV FI SI FR CY SK LT EE MT

LU

Ch

ange

in C

ET1

in %

of

RW

A

National discretions


15

Source: Financial Stability Report May,2015, Banco de España

0

1

2

3

4

5

6

7

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

NL FR IT DE UK ES

PORTFOLIO WEIGHT RWA RELATIVE SAVING

IRB WEIGHT IRB INDICATOR (Right-hand scale)

%

IRB IMPACT ON RWA Private Sector Portfolio

RWA RELATIVE SAVING: Average

Risk weighted assets


16


Accounting

To ensure that the accounts give a fair view of the banks’ financial situation is key.

Solvency ratios are calculated on the basis of accounting information.

There are noticeable discrepancies between the accounting criteria used in the different jurisdictions (AQR results), although IFRS principles must be applied in most of them.

The harmonisation of these criteria would be highly desirable (classification of exposures and provisioning policy).

Specially considering the entry into force in 2018 of the new standard (IFRS 9): expected loss vs. incurred loss.

THANK YOU FOR YOUR ATTENTION

spanish banking sector in the ssm context · 2016. 2. 11. · portfolio weight rwa relative saving...

Documents