MADRID, 4 Oct. (EUROPA PRESS) –
BBVA, Santander and CaixaBank have on their balance sheets around 30,200 million euros in assets linked to fossil fuels, which represents 1.12% of their total assets, compared to 1.05% of the average of the European Union (EU). ), and 1.47% of the world average, according to an investigation by Finance Watch, a European organization of which Asufin is a member.
In this way, the three entities would be among the least exposed to this type of fuel in the world. In this sense, the study shows that the 60 largest banks in the world by number of assets -22 of them from the European Union- have some 1.35 trillion dollars (around 1.38 trillion euros) exposed to fossil fuels.
Through a statement, Asufin explains that fossil fuels are the factor that “is contributing the most” to accelerating climate change and that many of these investments “will have to be discarded” before the end of their economic life, within the framework of the transition to a sustainable economy. “They will become captive assets and lose their value, which will mean losses for the banks that finance them,” explains the association, which maintains that these losses “could destabilize the financial system as a whole”, causing “another financial crisis”.
In this sense, the Finance Watch study shows that the exposure of world banks to assets consisting of fossil fuels in themselves –and without taking into account other sectors of the chain that would generate large emissions– is “practically equivalent” to the exposure of the entire financial system to ‘subprime’ loans before the global financial crisis of 2007-2008. In this regard, Asufin acknowledges that between fossil fuels and ‘subprime’ loans there are “obvious structural differences”, there are common features between the situation then and the current one.
The study notes that applying a 150% risk weight to bank assets that are exposed to fossil fuel credit risk “would require, on average, additional capital equivalent to about three to five months” of bank profits. analyzed in 2021.
These figures assume that the average additional capital per bank would amount to 2,690 million euros, the equivalent of 2.85% of the banks’ current net worth –as of December 31, 2021– or 3.42 months of their net income in 2021.
For the Spanish case, the three main banks would need to raise an additional capital of 1,400 million euros to apply a higher risk weighting to their assets linked to fossil fuels. Asufin estimates that they could achieve it in about 2.99 months by retaining profits “given the profitability” of these entities.
Asufin notes that, in the years following the global financial crisis, banks raised a “huge amount of capital” within 18 to 24 months “without reducing their loan grants or total assets,” through a combination of retained earnings. and the application of higher spreads for loans.
The additional capital required for this proposal would be “much less” and would be equivalent to withholding “only one quarter of profits”, although in practice the banks would have more time to respond, since normally this type of measure is applied gradually over longer periods, the association says.
Thus, he states that this new capital gap “could be very easily bridged” by retaining profits for an adequate period, without reducing the capacity to grant loans, which is important “to support a sustainable transition”.
“This would not prevent banks from lending to clients in the fossil fuel sector, although banks would have to introduce a higher risk premium on their loans to account for the associated risks,” adds Asufin.
The association considers that the current legislative review of banking prudential rules (the Capital Requirements Regulation and Directive) being carried out by the European Union is a “unique opportunity” to introduce a sectoral risk weight for credit risk exposures. of fossil fuels.
“Going forward, supervisors should work with banks to apply the changes gradually over an appropriate period,” Asufin concludes.
