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Everything indicates that Spanish banks obtained the highest profits in their history in 2023.
About 26,000 million euros.
The explanation for this fortune points to the way in which they have taken advantage of the rise in interest rates.
They immediately increased rates on mortgages and loans, but were more reluctant to increase the return on savings and deposits.
There is, however, another, less well-known explanation for part of these prodigious profits of Spanish and European banks.
The European Central Bank (ECB) and national central banks have granted around €140 billion of risk-free windfall profits to private banks in 2023. It has been made possible thanks to the generous remuneration of 4% of the reserves deposited by the banks private sector in central banks amounting to 3.7 trillion euros.
A transfer from a public institution to private banks of magnitudes comparable to the spending of the European Union in 2023 (169 billion euros).
These data appear in the Open Letter that prominent economists and members of the European Parliament addressed to the Governing Council of the ECB on the 24th. The letter is signed by professors Yuemei Ji, Paul de Grauwe, Sebastian Diessner, Andrea Roventini, Philipp Heimberger and Uuriintuya from Positive Money Europe.
Also by the MEPs René Repasi, Philippe Lamberts, Bas Eickhout, Henrike Hahn, Paul Tang, and Evelyn Regner and the United Nations rapporteur, Olivier De Schutter.
The text estimates “very worrying that while banks have received 4% of their reserves in the Eurosystem, their clients receive a minimum remuneration for their savings with an average of 0.35%.
As a result, ordinary households are not reaping the benefits of the high interest rates set by the ECB, while they endure high interest payments on their loans and mortgages.”
And it calls for increasing unpaid reserves to achieve “a more stable and equitable financial system in Europe.”
The issue had already been raised by De Grauwe last summer and other economists such as David Hollanders in
Social Europe.
Carlos Arenillas, former vice president of the CNMV, and Jorge Pérez, former head of regulation at the Bank of Spain, explained in
The Law of Banking Silence
(November 14, 2023 in
Cinco Días
), that “these payments are going to generate significant losses and deteriorate the assets of the Bank of Spain.”
Paul de Grauwe and Yuemei Ji have compared in
Fightin Inflation More Effectively Without Transferring Central Banks's Profits to Banks
the payments made to banks by the large central banks until August 2023: ECB €146 billion, (1.10% of GDP) ;
Fed 162,000 million dollars, (0.64% of GDP) and Bank of England 39,000 million euros, (1.75% of GDP).
Spanish banks received 9,170 million euros, (0.68% of GDP) while German and French banks received 49,107 (1.27%) and 35,925 (1.36%), respectively.
Europe cannot function with so much organized inequality without transparency.
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