president of Bank Sabadell, Joseph Olivehe warned that the new banking tax could encourage the sector to make fewer reservations in order to maintain the dividend to shareholders. During his speech at a meeting on economic security organized by the Mutualidad de la Abogacía, Olia again accused the tax, which he considers “unjust”, because taxes extraordinary profits “that do not exist” and affects bank shareholders, not all entities.
Although the director showed confidence that during the parliamentary process “the most unfair aspects will be smoothed over and disrupts banking and financial activities more”, he also warned about the problem that this tax could represent at a time of economic uncertainty in which banks need to be more careful and creating provisions for increasing bad loans in the foreseeable future. “If in this situation a tax is introduced, which is in a way a special dividend, part of that dividend that we had to put in provisions, because it encourages us to make fewer provisions so that we can continue to pay the dividend to shareholders and pay part of this dividend to the state in a new attachment. So, we have a problem in front of us that we will see how it will end”, he warned.
In any case, the president of Sabadell stressed that the banking sector is facing the current scenario of economic deterioration with uncertainty, but with high solvency, much more than in other crises. “Not only are capital rates higher, but also doubtful loans are smaller and the dressing is more than enough. So we are in a situation that banks can face,” he said. Oliu believes that sector revenues will be positive in 2022 and 2023although some of the improvement caused by interest will be offset by higher costs.
Limiting mortgages would reduce the supply of credit
While he remains optimistic about mortgage defaults, he noted that inflation will increase family effort and therefore will be a loss of purchasing power. Faced with a possible situation where part of the population is faced with paying their bills and paying off their mortgage, Oliu assured that the bank is willing to help its clients, but opposes capping interest rates on mortgage loans.
“Putting a cap on the prices of things always produces the opposite effect of what was intended: in the case of mortgages, it would produce reduction in the supply of mortgage loans for families. So that’s a bad solution,” he warned. The bank’s proposal, on the contrary, is to offer families in a socially vulnerable position an extension of the mortgage loan repayment period, thereby reducing the installments, but also a moratorium on principal repayments while the crisis lasts if they become unemployed. “It is a solution that does not affect credit and which positively affects the family“, said the president of Banco Sabadell.