Banks facing challenges
The banking and financial sector is facing important regulatory changes as well as corporate developments; interest rates unlikely to change much
Regulatory changes that cannot be delayed, the digitalisation of financial services and corporate movements that will lead to even fewer entities are seen as the main challenges for banks during 2017. There are two major regulatory changes: Basel III and MiFID II which will have a negative effect on profit margins in coming years with more control over capital ratios and high-risk practices that in recent years brought in big profits.
Another challenge traditional banks will face is the appearance of the so-called “fintech” entities with techno-giants like Google, Apple, Facebook and Amazon providing financial services. Facebook can now operate as an electronic money institution and will soon allow users to transfer money via Messenger. This should be a stimulus but banks complain the new players enter the market with different rules.
The digital transformation will see more branches disappear. Between 2010 and the present day, that number has dropped from 43,000 to 30,000 in Spain, a trend that will continue.
Predictable corporate mergers are between BNM and Bankia, in an operation which will involve Liberbank, as well as the IPOs of Ibercaja and Unicaja and a takeover bid or capital expansion for the Banco Popular.
Whatever happens, 2017 will be difficult for banks, with continued digitisation and the scenario of low interest rates. The European Central Bank (ECB) has no plans to raise interest rates this year, although this could change gradually as from December, later than was thought. With the Federal Reserve raising the price of money, this could spin off into the Euro zone.