Guindos "urges" bank mergers and warns of the slowdown in the recovery of the European economy

The recovery of the European economy due to the impact of the coronavirus is not being exactly as expected and is accentuating the difficulties that the banking sector was already facing.

Hence, the vice president of

(ECB),

, urged this Tuesday to undertake "relatively quickly and urgently" the consolidation of European entities to address the profitability problems that already existed before the crisis , but that have been exacerbated by the pandemic.

During his speech at a seminar at the Menéndez Pelayo University organized by Apie, the also former Minister of the Economy of Spain assured that "before the Covid-19 crisis it was very important to adjust costs and eliminate excess capacity, but with the pandemic such actions have become much more essential ", has warned the central banker, for whom the consolidation of the sector can be a very useful instrument.

" he said.

In this sense, Guindos recalled that before the crisis the return on capital of European banks was "around 6%, when investors demand between 10% -12%", while this year the return on capital " it is below 2% and by 2021 it will be around 3% "as a consequence of the economic crisis, the need for higher provisions and the fall in the income of the entities.

However, the Vice President of the ECB wanted to make it clear that the consolidation process is in the hands of the institutions and the ECB does not interfere in their decisions, so there is no model or design from the point of view of mergers to carry out.

"We do not see either with good or with bad eyes, we do not interfere with the decisions of the banks,"

Guindos has defended, noting that it is the banking supervisor who "then does its job."

"We do not have any model from the point of view of consolidation. We do not design any consolidation map," he said.

In the case of Spanish banks, the former Minister of Economy has highlighted the consolidation and consolidation process that has been carried out in the country in recent years, although he has pointed out that the sector has been affected by the greater fall in the GDP and low profitability.

Slowdown

In the same meeting, Luis de Guindos also warned about the loss of intensity of the recovery in the Old Continent, especially in the month of August.

"In the third quarter we expect a significant increase in economic activity, although we have seen that the data for July were very strong while those for August have lost some intensity, especially leading indicators such as PMI," he pointed out.

De Guindos has highlighted that

and prospects

continues to predominate

, including a different approach by governments in the face of the second stage of the pandemic, in which they are reluctant to a new confinement.

In the case of Spain, the Vice President of the ECB has pointed out that there are "multiple reasons" why the fall in GDP has been more intense than in the euro zone, with a contraction of almost 23% in the first half of 2020 ,

, the weight of the services sector, especially tourism, as well as the size and scale structure of Spanish companies, "very small for regulatory and administrative reasons and due to the lack of of market unit ".

Thus, the former minister has pointed out a

compared to the rest of the euro zone in the most recent macroeconomic data, something that may be marked by the evolution of tourism.

"They are notices that must be taken into consideration," he warned.

According to the criteria of The Trust Project

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