Vice President of the European Central Bank (ECB), Luis de Guindoshas underlined the need for banks to fully reflect the monetary policy through the transmission to assets, but also to the remuneration of savingsfrom increases in interest rates. “We are raising interest rates to affect the returns on assets and liabilities in their entirety,” said the Spanish economist during his speech at the XL Seminar of APIE within the framework of the Summer Courses of the Menéndez Pelayo International University (UIMP ).
In this sense, he explained that when beginning the rate hike cycle The transmission of monetary policy occurs in the first place by the asset of the banks by raising the interest charged to their customers, which produces a tightening of financing conditions for the purposes of reduce aggregate demand and affect activity and reduce inflation. However, the vice-president of the ECB has stressed that, after there is another transmission channel, which is the remuneration of savingsfor which reason he has warned that the complete transmission of the ECB’s monetary policy “requires that the remuneration of savings also increase.”
In this sense, Guindos has defended that, beyond the remuneration of deposits, a European level is being seen transfer of funds from demand deposits to term deposits, as well as the appearance of other alternatives for the placement of savings, such as money funds or the purchase of short-term public debt. In any case, Guindos has insisted that, from the point of view of what is the transmission of the ECB’s monetary policy, “it is very important that it be reflected in everything that is the spectrum of returns on bank assets and liabilities“.
On the other hand, given the criticism of a possible reduced competition in the banking sector that explains the delay of entities in countries such as Spain when it comes to increasing the remuneration of customer savings, the vice president of the ECB has defended that competition not only depends on the number of competitors, but also on the solvency of these. “Competition, rivalry in the markets depends not only on the number of competitors, but also on the solvency of the competitors. You can have many, but they are effectively considered not very solvent, they are not true competitors,” she pointed out.
Guindos hopes to fulfill his term at the ECB
Regarding the Spanish economy, De Guindos referred to “two positive aspects: current account balance of payments surplus and a healthy financial sector“, two conditions that place the country in a good position for the future. “The foundations of the Spanish economy are good. From an objective point of view, Spain can make a lot of progress in terms of real convergence with Europe”, she pointed out, to later add that “only one issue is missing: consensus to make the necessary reforms”.
In this sense, Solchaga agreed that Spain is “well positioned for general and industrial remodernization in particular”, and pointed to the potential development of the industry linked to renewable energy. Asked about the possibility of once again being a minister of an eventual PP government after the July 23 elections, De Guindos recalled that he has “a little less than three years left in the ECB” and that he hopes to fulfill his term.
Monetary policy does not generate instability
In turn, the vice president of the ECB has defended that the monetary policy implemented by the institution, which has raised the price of money by 400 points basic After undertaking eight consecutive interest rate hikes since July 2022, “it is not causing problems from the point of view of financial instability”. In this sense, Guindos recalled that the central bank’s policy aims to reduce inflation, which was above 10% in October and is now around 6%, while the core rate is proving “much stickier”. “We have a mandate”, she has underlined her.
Likewise, he pointed out that, despite the recent financial turmoil in the United States and Switzerland, the indicators of financial stress in Europe are in levels even better than before, including very stabilized risk premiums or even with a downward trend. In this way, for the Spanish economist, Europe, from the point of view of what financial stress is, has overcome the situation for the moment “without any type of accident”, for which he has affirmed that monetary policy “is not generating problems from the point of view of financial stability.
