In this context, 2011 will remain a difficult year for almost all economic agents, especially for Spanish banks, which must strive to defend their bottom line. Their net interest income will come under pressure from the stagnation of business volumes and the increase in financing costs, although, to qualify this, the pass-through of higher marginal rates to average margins is relatively slow. Furthermore, despite the substantial efforts made, the Banco de España’s provisioning rules will continue to compel banks to carry on recording provisions to restructure their assets. Against this backdrop, banks must counter the negative pressure on  6  BIS central bankers’ speeches  profitability through cost containment, especially in those banks involved in restructuring processes. Banks will continue to suffer from the flatness of their main line of business, namely lending. Solvent demand will remain low and, if credit usually only recovers at the end of an adjustment phase, in the Spanish case, since households and corporations have to reduce their debt, solvent demand for credit can be expected all the more to take longer to grow. Given this outlook, it is most important that the banking sector is ready to provide credit when the related solvent demand recovers in parallel with the improvement in the situation of corporations and households. Accordingly, the restructuring measures adopted to date have prevented the survival of zombie banks which, were it not for their integration into the best banks, would have ultimately proven useless for providing credit.
Indeed, the average size of the resulting institutions is two and a half times larger, which boosts their competitiveness and facilitates the raising of external funding. Second, to reduce the excess capacity in their branch networks and central services. The adjustment envisaged in the restructuring plans would involve a reduction of 10 to 25% in the number of branches and 12 to 18% in the number of employees. These cuts are in addition to those which had already been made previously, of 5% in branches and 4% in staff from their peak levels in 2008. However the ultimate objective of the integration processes was to strengthen the viability of the resulting institutions with the funds and management capacity of the savings banks best positioned to  2  BIS central bankers’ speeches  lead each of the integration processes, and to contribute to cleaning up savings banks’ balance sheets. In fact, thanks to these processes, savings banks have recognised additional losses on their loans and receivables and foreclosed assets for more than € billion. Finally, the savings banks law was amended in an effort to increase the professionalism in the management of these institutions, and to open them up to market discipline and the possibility of raising share capital to strengthen their solvency. In parallel with the restructuring of the savings banks, there has been a significant drive to clean up balance sheets in the Spanish banking sector and to ensure that assets are appropriately valued.