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Bankia's chairman, José Ignacio Goirigolzarri, during his speech at the Santander UIMP.

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During his speech at the Santander UIMP

Goirigolzarri: "Banks have renegotiated an annual average of 11% of the credit stock with households and companies to make payments easier"

The president of Bankia has participated in the course 'Sustainable finance and the future of the economy', organized by the Association of Journalists of Economic Information (APIE) in the UIMP.

Communication Bankia

By  Communication Bankia

Publish on 
19 June 2019 - 12:00

  • The 34 main business refinances in which Bankia has participated have contributed to the maintenance of almost 243,000 Jobs
  • The chairman of Bankia said that "truly, we have rescued depositors and society as a whole and, moreover, it has served to stabilise the industry and the economy"
  • Since 2013, the Spanish financial industry has doubled the volume of financing granted to households and businesses, both in housing mortgages and consumer credit
  • Households saved a total of 17,300 million Euros in interest last year compared to 2012, while companies paid 26,600 million less
  • Goirigolzarri argued that regulation must be stabilised, now that ten years have gone by since the worst moment of the crisis, to face the challenge of profitability in the European financial industry
  • "We are on the right track to achieve our goal of making Bankia the preferred bank by society, which happens to be the most profitable, efficient and solvent bank in Spain"

Bankia's chairman, José Ignacio Goirigolzarri, argued today that the bank bailout has helped sustain the Spanish economy and the financial industry, which between 2013 and 2018 has renegotiated the terms of loans for households and businesses at an average rate of 11% of the outstanding credit stock.

During his speech in Santander during the 'Sustainable finance and the future of the economy’ course, held by the Association of Economic Information Journalists (APIE) at the UIMP, Goirigolzarri wanted to analyse the ten years since the lowest point of the worldwide financial crisis.

In this regard, the chairman of Bankia pointed out that the 11% renegotiation of credit stock conditions is a very important figure, as it shows the direct support from banking to businesses and households by improving the conditions of their loans, either lengthening the terms, reducing the rates or allowing grace periods.

When a bank is rescued, it is not rescuing the shareholders, but the depositors and the society as a whole.

José Ignacio Goirigolzarri
Bankia's chairman

Specifically, in the first year after the bailout, financial institutions refinanced loans worth more than 211 billion Euros, which at that time represented 21% of Spain’s GDP. In the case of households, during that year the mortgages of around 800,000 homes were refinanced to make payment easier.

Regarding companies, Goirigolzarri gave as an example of the support provided the fact that the 34 largest refinances in which Bankia has participated in recent years have contributed to maintaining a total of 242,828 jobs.

In addition to the support that banks have been able to provide to the economy, the chairman of Bankia explained that public funds helped to ensure the savings of citizens and restore credit flow, as well as sustained the financial stability of the entire banking industry and the economy as a whole.

Depositor bailout

Therefore, Goirigolzarri has stated that, when a bank is bailed out, "it is never to help out its owners, that is, its shareholders, since they lost all their investment, nor their managers, who lost not only their jobs, but in some cases had to face the justice system”. "The bailout is actually for the depositors and society as a whole and, moreover, it serves to stabilise the industry and the economy", he pointed out.

In the case of Spain, the total amount of deposits from entities that received public funds totalled 487 billion, of which 242 billion were legally covered by the Deposit Guarantee Fund (FGD), although the real amount of this fund was it was only 8 billion, or 3% of deposits.

"Who would have had to face the payment of the 242 billion that were guaranteed, and not entered?" Asked Goirigolzarri, who then ensured the Government would have had to tackle this payment, 4.5 times the amount invested in the bail out. Not only that, there were also 245 billion in deposits that were not guaranteed and whose holders, "quite possibly", would have lost everything.

Moreover, thanks to the public funds, the bailed out banks were able to face various return processes to private savers for an amount of close to 6 billion euros. Only in the case of Bankia, more than 5 billion have been returned to preferential shareholders and minority shareholders.

In this regard, Goirigolzarri stated that the bailout of problematic banks, "not only prevented a cascade of very negative events both in the rest of the industry and in the economy itself, but also avoided having to face a series of costs for the public administration that would have been unacceptable for our country ".

More credit and high interest savings

The recovery of normal banking credit also led to the granting of new operations to different economic agents. Thus, since 2013, industry sector has doubled the volume of financing granted to households and businesses, both in terms of housing and consumption.

Goirigolzarri explained that the increase in the risk premium jeopardized the financing capacity of the economy, given that an increase of 100 basic points meant an increase of 12 billion in interest payments on the debt, i.e., 1% of GDP. If it had remained as high as it was in 2012, "the situation would have been unsustainable for our public finance", he stressed.

Thanks to the stabilisation of the risk premium, loan rates could be reduced to the same levels as the major EU countries, "and therefore Spanish SMEs enjoy interest rates below the ones in Germany”.

The chairman of Bankia gave as an example that in 2018 the Public Administration as a whole, faced an interest payment on their debt similar to that of 2012, despite having increased it by 32%.

Regarding households, only in 2018, there have been savings of 17.3 billion in interests with respect to 2012, which means that today they pay 80% less than what they used to pay. And as for companies, this figure totals 26.6 billion. And these savings account for an average of 40% of the improvement in profits over the last six years.

Profitability and regulations

In his speech, the chairman of Bankia referred to the three main challenges of the industry: reputation and image, the challenge of changing customer habits and profitability. He focused his attention in this last objective.

He said that the profitability of any project must be put in context with the necessary capital to carry it out. This indicator is impacted by interest rates, "which affects all banks that operate in the EU".

The banking sector faces three main challenges: the image reputation, the change of customers' habits and profitability.

José Ignacio Goirigolzarri
Bankia's chairman

Moreover, greater regulation is also increasing the pressure on bank profitability. So much so that the financial crisis has led to a regulatory escalation, which has resulted in a 2.5-fold increase in capital or own fund demands over the last decade.

In terms of capital requirements, there has also been a cost for generating an additional security buffer (MREL). Additionally, profitability has been affected by other costs associated with regulatory requirements, such as contributions to European restructuring funds, national guarantee funds or taxes on deposits. As a result, a quarter of Bankia’s investment in IT is aimed at regulatory compliance.

"It is very important to stabilise regulation ten years after the start of the crisis, although it is very important that all actors are treated equally, since otherwise it will generate regulatory arbitrations, can destabilise the system as we saw in the past", said Goirigolzarri.

Pan-European and national mergers

Finally, on whether mergers can be the solution for improving the profitability of the industry, the chairman of Bankia pointed out that "in the short term, pan-European are still very hard to do and the potential synergies and profitability improvements are very small with a high risk involved".

In the case of domestic mergers, he added that they also entail charges that make them difficult to implement, although "it is true that synergies are much more clear in this case".

Bankia: a leader in solvency and efficiency

In the case of Bankia, Goirigolzarri stressed that, within this financial setting, Bankia has considerable strengths, such as its solid balance sheet and leadership in solvency and efficiency (measured as expenses in relation to the volume of assets).

Bankia has important strengths, such as the strength of the balance sheet and the leadership in solvency and efficiency.

José Ignacio Goirigolzarri
Bankia's chairman

"We are aware that our main challenge is in the upper part of the income statement, in boosting our net interest income and our fee income", said Goirigolzarri, who highlighted the fact that Bankia is making progress in improving the balance sheet mix, with an increasingly higher weight of business and consumer credit, while increasing market shares in products of greater added value for the customer, such as investment funds, life insurance or payment methods.

"I believe that we are on the right track to achieve our goal of becoming the preferred bank by society, which happens to be the most profitable, efficient and solvent bank in Spain," he said, and he expressed his "optimism" about achieving this goal.

"Our credit book has stopped going down for the first year, we are going to stop the drop in net interest income and in 2019 we will be able, for the first time, to increase our core result (net interest income + fees - expenses)." "All this is very good news", concluded Goirigolzarri.


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