The digital newspaper Valencia Plaza published an opinion piece by our managing partner José Roca Barrachina on the consequences of bank mergers for credit access. Titled «Bank Mergers: Beware of Credit!», José Roca warns that these processes can soon cause «a collateral damage for businesses: access to credit will become more difficult and restricted in traditional banking, and negotiating power will increasingly diminish. This phenomenon is repeating what occurred between 2008 and 2011, when the crisis spurred a concentration of financial institutions. Then, there was a contraction in the supply of credit and an increase in interest rates that especially affected SMEs. These consequences may now repeat, but with a Spanish banking landscape already reduced from sixty banks and savings banks to just twelve entities. A new phase of mergers forces the client to seek financing in an oligopolistic, restricted market with less competition.»
The opinion of the director of Kaizen Consulting is that «the more mergers, the less credit,» something that affects bank customers but especially businesses: «The merger between BBVA and Sabadell would leave 75% of the credit for Spanish SMEs in the hands of just three large national entities. Most companies work with several banks to diversify their financial risks and may now find that the credit they previously had with four entities is concentrated in two, and it won’t be easy to maintain the sum of the previous financing limits. And this, we insist, is just the beginning. What happens with the remaining entities not yet in any merger predictions is a matter of time: there will be more merger processes.»
José Roca advises entrepreneurs to start broadening their financing options: «A horizon of restrictions and tightening access to credit is foreseeable. And if liquidity doesn’t flow, the rising cost of financing is another threat on the horizon. That’s why it’s time to look towards alternative sources to traditional banking, and SMEs must do this. Alternative banking, BME Growth (the new name for the Alternative Stock Market), all kinds of funds, bond and promissory note issuance, innovative operations like rentback… are options not only valid for large companies but increasingly accessible to small and medium-sized entrepreneurs who won’t find them in the usual channels.»
Anticipation and foresight are tools to successfully face the foreseeable liquidity problems: «It’s time for entrepreneurs, with foresight, to open up to the search for new financing avenues to move forward without fully depending on conventional banking. It’s better to anticipate the emerging scenario to find the best alternatives and secure the liquidity needed to overcome these turbulent times. Studying all alternatives within our reach and knowing the tools to apply before possible difficulties arise is our recommendation. It’s better to anticipate. The doors we always knocked on are shrinking, but there are many more ready to open.»
