Pablo Hernández de Cos: The Spanish banking industry - developments and challenges against a backdrop of uncertainty

Speech by Mr Pablo Hernández de Cos, Governor of the Bank of Spain, at the 40th APIE Seminar (Spanish Financial Press Association), organised by Universidad Internacional Menéndez Pelayo, Santander, 23 June 2023. 

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

I would like to thank the Spanish Financial Press Association (APIE) for once again inviting me to take part in this event, thus giving me the opportunity to share with you the Banco de España's view of developments in the Spanish banking industry and the challenges ahead. To set this analysis in context, I will first outline the economic outlook and the most recent decisions taken by the European Central Bank (ECB).

The global and European context

Global economic activity has performed relatively favourably in 2023 to date, supported by a notable easing of energy prices and fewer disruptions to global value chains. Moreover, the services sector has continued to benefit from the end of the health crisis, while strong labour markets and fiscal policy support have helped sustain the strength of activity.

That said, some signs of weakness have also been discerned in the most recent period, especially in manufacturing.

In the euro area, GDP contracted slightly in the last two quarters. In particular, 2023 Q1 saw private consumption decline and net exports make a positive contribution, mainly as a result of the contraction in imports prompted by weak demand and lower energy consumption. According to the latest Eurosystem projections, in Q2 growth will recover to around 0.3% quarter-on-quarter, although the most recent data suggest that this figure could be somewhat lower. Growth is projected to stabilise in the second half of the year, and to remain stable in 2024 and 2025, underpinned by a recovery in real disposable income thanks to the anticipated easing of inflation, rising wages and resilient employment. Conversely, the tightening of monetary policy will exert increasing downside pressure on economic activity.