Pablo Hernández de Cos: Low interest rates for longer. Profitability and risk appetite in the Spanish banking sector

Speech by Mr Pablo Hernández de Cos, Governor of the Bank of Spain and Chairman of the Basel Committee on Banking Supervision, at the 15th Banking Industry Meeting, organized by IESE (Escuela de Negocios de la Universidad de Navarra) Business School, Madrid, 3 December 2019.

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

Ladies and gentlemen, good morning:

First I would like to thank the organisers, and, in particular, Professor Juan José Toribio, for their invitation to participate in the 15th Banking Industry Meeting.

In October the Banco de España published its Autumn 2019 Financial Stability Report. As usual, this report identifies the main risks to financial stability in Spain and their recent behaviour. The analysis shows that the balance of risks to financial stability has worsened since the publication of the Spring report and identifies three main risks: the global economic slowdown and geopolitical uncertainty, low bank profitability, and the legal risk for banks derived from the potential consequences of the outcome of pending court action.

The worsening of the risks to the stability of the Spanish financial system in the past half year is due in particular to the downward revision of the global economic outlook. Indeed, this year global GDP growth is expected to be the lowest since the international financial crisis; in addition, the balance of risks to this growth is tilted downward, mainly as a result of the continuing high level of geopolitical uncertainty.