Pablo Hernández de Cos: Monetary policy and bank profitability in an environment of uncertainty

Speech by Mr Pablo Hernández de Cos, Governor of the Bank of Spain and Chairman of the Basel Committee on Banking Supervision, at the 10th Conference on the Spanish Banking Sector, organised by the Valencian Economic Research Institute (IVIE) and the University of Valencia, Valencia, 18 September 2019.

The views expressed in this speech are those of the speaker and not the view of the BIS.

Ladies and gentlemen, good morning.

I should like to thank the Valencian Economic Research Institute for the invitation to speak at this conference on the Spanish banking sector, which this year marks its tenth anniversary. I am honoured and delighted to participate in this event and share some reflections with you regarding the current profitability of Spanish banks and the main challenges that will shape their future. As you know, this is a subject that is attracting a lot of attention in Europe, both on the part of analysts and supervisors and the industry itself, owing to the concern about banks' low profitability.

Before I address this issue, allow me to start by describing the economic situation in the euro area and, in particular, the decisions taken by the Governing Council of the European Central Bank (ECB) last week. This is very relevant for the financial system, insofar as it is the context in which its activity will be carried out over the next few years.

1. The economic situation in the euro area and the monetary policy response

The international economic context has undoubtedly become more unfavourable over the past year, with a slowdown in growth and, in particular, in trade.