Eloy Fontecha: "We are moving from a model based on bank lending to one based on disintermediation and the capital markets" May 28, 2013
Eloy Fontecha: "We are moving from a model based on bank lending to one based on disintermediation and the capital markets"
Eloy Fontecha, head of BBVA Global Fixed Income, analyzes the changes that are taking place in the industry and the role it will play BBVA in the new environment.
Q: You were recently appointed head of Global Fixed Income, which includes credit and interest rates. What are the challenges you face?
One of the main challenges is ensuring that the focus of our businesses is sufficiently aligned to the new environment, with more stringent regulatory requirements and changes in the market infrastructure.
Regarding the service we provide to corporate customers, we must tailor our skills to the new forms of financing that our customers will have to use given the problems that the cost of balance sheet resources causes for traditional forms of financing. We will be moving from a model based on bank lending to one based on disintermediation and the capital markets.
With regard to the service we provide to financial institutions, we must ensure that we draw on our skills to advise these institutions on the management of their balance sheets and on financing mechanisms that comfortably comply with the new and ever more stringent capital requirements and liquidity and leverage ratios.
Q: After a difficult few years with the capital markets virtually closed in some regions, it seems that things are starting to improve. How do you view the business prospects?
We have good prospects provided that we are able to adapt to the regulatory context that we mentioned. BBVA, which has always forged relationships underpinned by trust with its major customers, also offers an outstanding global distribution capacity. This means we are well placed to play a key role in the capital markets in both Origination and Distribution. Here our ability to link the need for financing and investment between different geographical areas is a business objective in itself.
No less important is the opportunity for improvement associated with balance sheet management products, known as Asset Liability Management (ALM).
All these businesses entail challenges but at the same time they are clear business opportunities for which we are, in my view, exceptionally well positioned.
Q: What is the role of the banks in the new context?
Previously the role of the banks was mainly to provide balance. Now, in the disintermediation process which will undoubtedly take place, customers will have to finance themselves by tapping the capital markets.
The role of the banks must be to advise their customers on accessing the capital markets, guaranteeing the adequate distribution of their issues and, in turn, advising customers on the management of their balance sheets.
Q: What does a bank like BBVA contribute to its customers?
For a bank that forges strong relationships like BBVA, the role that we can and must play in helping customers to explore fresh avenues for financing, providing advice and supplying products to improve balance sheet management, comes very naturally. The additional advantage we offer is our global footprint, which affords us access to the pools of investors worldwide.