According to the Banco de España 2018 Annual Claims Report, published last Wednesday, the number of claims processed by the Bank last year fell by more than 50% on 2017 to close to 19,700.1 Nonetheless, the total percentage of rectifications by banks relative to those estimated by the Banco de España was 70.6%, a similar percentage to that of 2017. 1  In any event it should be borne in mind that, since 2013, the annual claims figures have shown strong year-to-year oscillations, generally linked to the impact of specific legal rulings. 14/15  Business model Evidently, banks should analyse their current business models with a view to assessing to what extent they respond to this new technological and customer-relations reality, but also to identifying their strengths and weaknesses. To conduct this analysis, the above-mentioned management information is needed, which depends, in turn, on the quality of systems. Consequently, technology becomes an objective of the change in business model and a prerequisite for such change to occur, hence its central role. Naturally, another prerequisite worth mentioning is governance, without which all these changes will be destined for failure. Importantly, reflection on the business model should be individualised, and adapted to the particular characteristics of each bank. Indeed, the results of a theme-based review by the Single Supervisory Mechanism on profitability and business models show that there is no single approach and that there are differences in strategies among those banks with the best profitability results.
As we have witnessed in some cases in the recent past, the holding of these securities by individuals entails problems in a context of crisis, turning them even into an obstacle for the institution’s “resolvability”. And that is exactly the opposite of what the rule originally sought. The Banco de España is determined to prevent this type of past situation from recurring. We should not make the same mistakes again. For these reasons, the challenge of covering these issues is greater for smaller-sized banks, which have a scant presence on the markets and are more geared to the retail segment. I think it is important that banks, in particular those with less access to the markets, should take advantage of those windows in which investors’ appetite for this type of asset increases, so as to bring forward as far as possible the issuance calendar. One final aspect I wish to mention is the cost of these issues and of liabilities in general. The latest Banco de España Financial Stability Report offers the findings of a study on European banks which conclude that the higher the level of the CET1 capital ratio, the lower debt issuance costs are. 9/15  This effect increases as debt instruments become more akin to capital instruments. As can be seen in the chart, if the CET1 ratio increases by 1 pp, a 0.3% reduction may be expected in the cost of issuing instruments eligible as Tier 1.