10.07.2019  Opening address The current challenges of the financial sector / KPMG Margarita Delgado Deputy Governor  Good morning, and many thanks to KPMG for the opportunity to inaugurate this meeting on the current challenges of the financial sector. Dictionaries define a challenge as an objective or a task that is difficult to carry out, and which is a stimulus and a trial for the person facing it. I believe the challenges facing our banks conform perfectly to this definition; they are not in the least easy or straightforward to carry out, and sufficient motivation is clearly needed to tackle them. The challenges I refer to are fairly well-known and, generally, shared by all. As supervisors we are always addressing two such challenges: improved profitability and improved solvency. I believe profitability and solvency should be related. Without sufficient profitability, capital cannot be generated organically nor shareholders remunerated. And that in turn is an impediment to tapping the markets for new resources. Without capital, the growth of the business will be limited, exerting downward pressure on banks’ profitability. I should stress that, in my view, these two challenges are end-goals, i.e. they can only be directly attained as a result of achieving intermediate goals. I shall refer throughout my address to these intermediate objectives, which may be summarised in the form of another challenge: transforming the business model. Developments since the crisis broke  It is fair to stress that, following the crisis, Spanish banks have undertaken intense recapitalisation and restructuring.

According to the Banco de España 2018 Annual Claims Report, published last Wednesday, the number of claims processed by the Bank last year fell by more than 50% on 2017 to close to 19,700.1 Nonetheless, the total percentage of rectifications by banks relative to those estimated by the Banco de España was 70.6%, a similar percentage to that of 2017. 1  In any event it should be borne in mind that, since 2013, the annual claims figures have shown strong year-to-year oscillations, generally linked to the impact of specific legal rulings. 14/15  Business model Evidently, banks should analyse their current business models with a view to assessing to what extent they respond to this new technological and customer-relations reality, but also to identifying their strengths and weaknesses. To conduct this analysis, the above-mentioned management information is needed, which depends, in turn, on the quality of systems. Consequently, technology becomes an objective of the change in business model and a prerequisite for such change to occur, hence its central role. Naturally, another prerequisite worth mentioning is governance, without which all these changes will be destined for failure. Importantly, reflection on the business model should be individualised, and adapted to the particular characteristics of each bank. Indeed, the results of a theme-based review by the Single Supervisory Mechanism on profitability and business models show that there is no single approach and that there are differences in strategies among those banks with the best profitability results.