MADRID (Reuters) – The chair of Spain’s Santander, Ana Botin, on Thursday urged authorities to let European lenders use capital buffers to support growth and investments in the defence sector amid growing geopolitical risks.
EU countries are looking to boost defence spending by at least 800 billion euros ($863 billion) over four years after a shift in U.S. foreign policy under President Donald Trump has raised doubts about Washington’s commitment to European allies.
Releasing capital buffers built up to cope with potential market shocks would make hundreds of billions of euros of private sector money available to promote that and other investments, Botin, who chairs the Institute of International Finance trade group, told an event in Brussels.
“We build buffers on buffers on buffers. Now is the time to use them,” she said. “We don’t need to change anything structurally, just let us use the buffers. We need them now.”
Since the global financial crisis in 2008, regulators have imposed strict solvency requirements, forcing banks to build up capital buffers against potential future losses.
“What the U.S. is doing in terms of defence, in terms of the economy is a huge wake up call for Europe,” Botin said, adding that for years European banks had been told that financing defence companies was bad, but now there was a clear “need to rearm Europe” without delay.
Her comments come after the chairman of Spanish bank BBVA said last week that Europe needed to strengthen its independence in defence and security.
The European Central Bank declined to comment. As a supervisor, the ECB ensures banks manage risks but does not support or restrict lending to specific sectors.
Bank of Spain Governor Jose Luis Escriva has said recently the regulatory framework should be assessed to ensure it offered the right incentives for banks to finance defence investments.
In Spain, bank financing for the defence sector is very low. Credit specifically allocated to the manufacturing of arms and munitions hasn’t exceeded 0.1% of total bank credit over the last two decades, according to the Bank of Spain.
Botin also said Europe needed to implement its long-planned banking union and complete financial integration.
($1 = 0.9270 euros)
(Reporting by Jesús Aguado. Editing by Andrei Khalip and Mark Potter)
