The British Bankers Association thinks small savings banks models such as the Catalan are "problematic"

London (ACN).- The bank model of Catalonia, where most banks are small or medium-sized savings banks, is 'problematic' in these difficult economical times. This is the opinion of the Chairman of the British Bankers Association Angela Knight who said in an interview with the Catalan News Agency that the difficulties experienced by some savings banks in the last years confirm that 'size can be problematic in difficult times'. “If you are only concentrating on perhaps one very narrow area, no matter how important it might be, it does not necessarily give you the ability to survive during difficult times”, she said, “you have to get a broader type of investment exposure”.

“Small banks, and particularly the small savings banks, which are usually mutuals, have generally had the hardest time through the crisis”, said Knight, pointing out that the situation has not been only difficult in Europe, but also in the United States. “In the United States they are still closing about 5 or 6 of their small banks each week”, she added.

According to Knight, the economical crisis has demonstrated that “the size” of banks can become “problematic'”. The BAA Chairman thinks that savings banks such as the ones in Catalonia have to develop new strategies to be able to access new forms of financing themselves and not only be dependant on their clients' savings.

Knight compared the savings banks model in Catalonia and the rest of Spain with those in the UK that are known as 'building societies'. In England, these banking institutions “have been predominantly involved in the housing market” and, despite not being as hard hit by the housing crisis as other countries, they have been restructured. “They have found life difficult and so these mergers have taken place and we expect that there might be more mergers in the future”, Knight argued.

While analysing countries such as Catalonia, Knight says that the same UK model applies. “There is a size that is probably necessary”, she reiterated, adding that banks need to “diversify” their activities in different areas. In fact, Knight thinks that mergers are positive because, at the end of the day, banks can still offer a “good service” to their clients. “It won't be an easy time for them, but changes are certainly needed in the saving banks, as well as in other sectors of the banking industry”.

Stress-tests

Knight said that British banks are doing well and are in a “stable” situation after the crisis. She expects them to pass the new 'stress-test' of the European Banking Authority (EBA) without a problem, as they are already being examined “internally” in quite harsh tests. With regard to banks in Catalonia and Spain, Knight said that last year's test “just showed something that was widely believed to be the case”, namely, that Spain has “some strong banks” and some “smaller banks that were understood to be in difficulty”. Knight welcomed the reforms being followed by the Spanish banking system to regulate itself and promote mergers. She defined them as “critical” both for the country and for Europe.