the ghost of a oligopoly hangs over him Finance system Spanish for years. The concentration in the sector has skyrocketed since the outbreak of the previous crisis that began in 2008 as the number of relevant entities was reduced from 45 to 10 fruit of the nationalizations and mergers. The authorities, however, still do not see the situation as alarming, based on the indicators they use to measure the degree of risk to competition. However, one of these indicators marked a new record last year: the five largest banks of the country (Santander, BBVA, CaixaBank, Sabadell and Unicaja Banco) already concentrate the 69.3% of assets banking in Spain.
The data, updated a few weeks ago by the European Central Bank (ECB)financial supervisor of the euro zone, reflects that the absorption of Bankia by CaixaBank, fourth and third banks Spanish until its merger in March 2021, once again raised banking concentration for the first time in two years. It also affected, although to a lesser extent, the merger of Unicaja Banco and Liberbank. Between 2018 and 2020, thus, the market share of large entities fell from 68.5% to 66.4% as a result of increased competition in the sector after the restructuring after the financial crisis, which strengthened the smaller banks. The integration of the nationalized entity into the Catalan one broke this streak and took the indicator to a new all-time high.
The 2021 market share of 69.3% thus contrasts sharply with the 40.3% from 1999 (year in which the historical series of the ECB) and with him 41% from 2007 (the exercise prior to the bursting of the housing bubble). Regarding the main countries of the European Union, it is well above the data presented Germany (31.8%), France (49.3%) and Italy (51.6%), although it is below that of Holland (84.1%). In any case, it is still far from that of the countries with the worst records, such as Greece (98%), Estonia (93%), Lithuania (89.8%) or latvia (87.4%).
more amber
Even more relevant is that, as a result of the two mergers last year, the traffic lights used by financial authorities to measure the degree of competition in the market intensified last year the Orange that reached for first time in 2018 after the absorption of Popular by Sabadell. After two years of falls, like this, the Herfindahl and Hirschman index (better known as HHI for its acronym in English) rose last year from 1,082 to 1,270. As a general rule, the ECB estimates that a level below 1,000 implies a low concentration, while a level between 1,000 and 1,800 considers it to be low. average concentrationand above 1,800 it is of high concentration.
The main organizations of defense of competition in the world use this index to analyze the situation of a market. It is calculated by squaring the market share each company owns and adding those amounts together, giving larger companies more weight. A maximum value of 10,000 implies that a monopoly occurs. The European competition regulations of 2004 understand that a level below 2,000 is not alarming. In USAon the other hand, a level of less than 1,500 implies that the market is “deconcentrated”, between 1,500 and 2,500 it means that it is already “moderately concentrated”and above 2,500, “highly concentrated.”
increasing concentration
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In 1999, the Spanish financial sector had a very low level of 427, which in the following decade grew moderately to 459 of 2007. The mergers, however, have led it to skyrocket and remain for four years in a row at an increasingly orange level, although still far from the 1,800 level that marks the border with red. If the frustrated merger between BBVA and Sabadell had taken place, they would have added another 235 approximatelyaccording to market calculations, which would also have been below the worrying level.
This analysis is, in part, what explains why the ECB and the Bank of Spain have been for years urging to further process concentration (in the case of the Spanish organization, since 2015) so that the banks could gain efficiency cutting offices and staff and thus improve their profitability hit by low interest rates. In recent months, however, the message has seemed to lose weight in his speeches, largely due to the air that the rise in the price of money is blowing into the sector’s accounts to combat inflation. However, it is not ruled out that it will return to come back in the medium term due to structural challenges such as the digitization of its clientele or circumstantial challenges such as the possible increase in delinquency.