The specialized publication Economía 3 has published the opinion article by our managing partner, José Roca Barrachina, titled “Mergers Affect Us: Fewer Banks, Less Credit.” This reflection, prompted by the merger between Caixabank and Bankia, emphasizes how a new wave of bank mergers could negatively impact individuals and businesses.
In his article, José Roca recalls what happened during the previous crisis: “When bank mergers occur, although one of the goals is to ensure the flow of credit, we know the opposite can happen. During the merger years between 2008 and 2011, we experienced a contraction in credit supply and higher interest rates, as well as decreased competition, which reduced liquidity for SMEs. Let’s not forget that we had over sixty entities among savings banks and banks, and now there are eleven.”
Therefore, with experience, we can predict what might happen now. It is worth revisiting the circumstances when Santander absorbed Banesto, Banco Popular, or Banco Pastor. Or when Banco de Valencia was absorbed by Caixa, Caja Madrid by Bancaja, and CAM by Banco Sabadell. Who is the biggest loser besides the employees who lose their jobs? Undoubtedly, the customer.
Credit will no longer flow as before, prices will increase, and financing limits will be reduced because 1+1 does not usually equal 2, and the resulting number of entities will be fewer and fewer: from the current eleven banks (eight listed) we will go down to six or seven, making it difficult to maintain the current financing limits and leading to less access to liquidity.”
The managing partner of Kaizen Consulting provides a practical example: “A company that needs 10 million euros to finance its activity currently secures it with a pool of five banks, each contributing 2 million euros. If two of these five banks are absorbed, leaving a pool of three, who will provide the 4 million euros previously contributed by the two absorbed banks?” To avoid such problems, José Roca urges entrepreneurs to anticipate and safeguard themselves: “By seeking more financing options with other entities and knowing the alternatives of the alternative banking sector. Both are valid and compatible. If in the not-too-distant future, there will be half the number of Spanish banks we have today, we should analyze what the constantly growing alternative banking sector offers us: an environment with hundreds of players, ensuring a wide range of options without the risk of concentration.
Knowing that bank concentration will not be good for the consumer, simply because competition is reduced, and that within an oligopolistic market it is better to maximize options, reinventing our way of financing seems like a good idea. Those who only know the options of traditional banking are self-limiting, which can bring viability problems in the short term. Professionals dedicated to facilitating liquidity to companies are interlocutors with all financiers, not just traditional banks but also alternative banks, various funds, exits to the Alternative Stock Market, rentback operations… There are always options to obtain liquidity.”
In conclusion, he urges entrepreneurs to prioritize alternative financing options: “It’s time to question if what we are doing today will serve us in the coming months. Access to liquidity is the perfect lever to successfully overcome current uncertainties and ensure the future of companies. Not just for the coming months but for the coming years.”
