Dear Madam/Sir,
Let me first express my general appreciation for the high standards and carefully researched up-to-date contributions of the Financial Times. Yet, I find that the recent article on “unholy governance of Spanish and German state banks” (May 25th) is somewhat of an unholy exception in the otherwise admirable work of the FT. In a nutshell, the article puts to ridicule the decision-making bodies in what the author calls ‘state banks’. Speaking for Europe’s savings banks, let me correct the following points:
Firstly, without any prejudice against state banks, are the Spanish and German savings banks actually ‘state banks’? The answer in both cases is ‘no’.
In Spain savings banks are not ‘state banks’ but private foundations. Their governing bodies are composed of different stakeholders, among whom regional government bodies. This is in line with their markedly social purpose, according to which profits are divided between allocation in reserves and projects that serve the common good (‘Obra Social’).
For Germany, the article fails to distinguish between savings banks (Sparkassen), Landesbanken and other public banks. With very few exceptions, German savings banks are public law institutions, sponsored, but not owned, by their respective municipalities (and in any case not by the state). Landesbanken are owned partly by federal governments of their respective federal state and partly by the savings banks of their region. For more details on the characteristics of the German and Spanish savings banks as well as their function in the economy, let me also point to the recent study on diversity in the European banking sector published by CEPS, the well-known Center for European Policy Studies.
Secondly, as concerns the Spanish savings banks sector I find the misrepresentation of the cajas’ efforts to consolidate truly regrettable. Why highlight only the failure of the merger of CajaSur and Unicaja, but neglect to mention that mergers between other savings banks are taking place and that substantial progress has been made in a very short time? This clearly shows that, far from determined to block consolidation, the Spanish savings banks themselves are ambitious to drive this process. Also, the article is somehow biased, as it highlights the only two saving banks which have been intervened by the Bank of Spain during the crisis, but nothing is said about the remaining forty-odd that after almost three years of crisis have been able to sustain (and even increase in 2009) their average capital ratios. Many of them are currently among the most solvent financial institutions in the country.
Thirdly, this is the first time that I hear a serious news source describe the German savings banks as ‘troubled’. To the contrary, for 2009, the Sparkassen reached pre-tax profits of 4.6 bn – a significant increase compared to 2008; customer deposits increased by 1.3%. The article is equally wrong in stating that the current debate is focusing on consolidating the German savings banks. Consolidation of the Landesbanken, however, is indeed one of the important and necessary feats to be accomplished – it is also strongly favored by the German savings banks. It stands to reason that the journalist must have somewhat confused the facts.
As concerns Professor Hau’s study (I believe the author refers to “Subprime crisis and board (in-) competence: private versus public banks in Germany” published last October in Economic Policy), let me only clarify that – as strong as its messages may be – it hardly yields any conclusions for the German savings banks. The reason is rather simple: there are no savings banks among the institutions investigated.
A lot is happening in the banking sector at large and many of these developments are potentially critical and of great importance for the future of the European economy. The FT is among the news sources and commentators of the highest reputation – why embark on unfounded articles that do not stimulate sensible discussion but only force up the heat in an already hot debate?
Sincerely yours,
Chris De Noose
Managing Director of the European Savings Banks Group (ESBG) – World Savings Banks Institute (WSBI)