Office closures turn a third of zip codes into a banking monopoly | Companies

Spanish banking has less and less competition. The reduction in the number of entities due to mergers carried out in recent years, together with the reduction of the branch network due to continuous digitization and cost savings, have led the bank to hold a monopoly position in one of every three zip codes where you do business.

According to the data offered by the Bank of Spain, updated at the end of June 2021, there are 1,619 postal codes in which there is only one entity present (through offices). This is a high figure considering that in total there are 4,945 postal codes in which the bank has at least one branch.

In reality, the number of postal codes in Spain is greater, but in most of them there is no bank office. As this newspaper reported last October, more than half of the municipalities in Spain are empty of branches. The fact is that for the client the offer (in the places that exists) is increasingly reduced and the banks (where they have the business physically) have less competition.

The analysis by postal codes is the criterion already used by the National Commission of Markets and Competition (CNMC) when it studied the merger between CaixaBank and Bankia because he considered it to be the finest indicator. Then, the body chaired by Cani Fernández detected 86 zip codes in which the resulting entity would hold a dominant position: in 21 of them it would be the only entity present while in the remaining 65 it would have a duopoly position with low competitive pressure in a 1.5 kilometer radius from the branch. CNMC sources explain that at that time only the new postal codes in which the entity would become a monopoly were taken into account and did not include those in which it already held that position.

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According to the data analyzed by this newspaper, at the end of June the Catalan entity was the only one present in 460 postal codes. Follow him Abanca, which has a dominant presence in Galicia, in 187 postal codes. In third place, Unicaja, the other entity that has carried out a merger in the last year, after absorbing Liberbank, with 171 zip codes in which it is the only bank.

It is the circumstance that medium-sized entities and credit cooperatives take the top positions in the table, since on many occasions they are linked to a rural geographic area and it is the only entity that offers financial services in a face-to-face in that area.

By provinces, Toledo it is the one that accumulates a greater number of postal codes in which only one entity is present. Follow him A Coruña, with 60, and Badajoz, with 59. The provinces of Castilla y León are among those with the fewest postal codes in which only one entity operates, however, this is due to the fact that they are traditionally empty areas of branches.

Clipping more than half of the network

The financial crisis that began between 2007 and 2008 was the germ of the revolution that has taken place in the financial sector and that has been accompanied by bankruptcies of entities, mergers and the digitization of the business. And all this has caused a continuous reduction of the network of offices.

In fact, in 2008 the Spanish financial sector had 45,662 branches, the highest figure in the historical series. However, as of that year the closing of branches has been unstoppable. At the end of 2020, the total number of bank branches in Spain had dropped to 22,271, which means closing more than half of the branch network (51.2%) in just 12 years. This process has led to a reduction in the banking supply since, likewise, more than half of the Spanish municipalities do not have a single branch. According to the latest data offered by the Bank of Spain, of the 8,131 municipalities in Spain, 4,443 do not have a branch.

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The indicator commonly used to measure concentration in the financial sector is the índice Herfindahl-Hirs­chman. According to provisional data from the European Central Bank, the five largest Spanish entities concentrated 66.4% of the assets of the financial sector in 2020.

In that sense, Spain ranks 18th out of the 27 countries of the European Union, with 1,081 points, which means it is in a moderately concentrated market. However, Spain is one of the countries that has increased its score the most since 2008, when it was 497 (it has more than doubled since then). From there it has increased until reaching the maximum level in 2018, with 1,138 points, and has remained more or less stable (1,110 points in 2018 and the aforementioned 1,081 in 2020).

According to experts, the barrier in which one can speak of a highly concentrated market It is at 1,800 points, and one begins to speak of oligopoly and monopoly from 2,500 points. At these levels are countries such as Finland (2.250), Holland (2.001), Lithuania (2.408), Cyprus (2.285), Greece (2,320) and Estonia (2,578), although these are smaller markets.

Spain is well below the threshold that the ECB would consider a monopoly or oligopoly, but it is at a level of bank concentration much higher than that of the leading European economies. In fact, neighboring countries such as Germany (325), France (688) e Italy (675) have a much lower level.

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George Holan

George Holan is chief editor at Plainsmen Post and has articles published in many notable publications in the last decade.

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