Spanish banks lose more than 500 million with the sale of foreign exchange

The volatility of the foreign exchange market for months due to geopolitical conflicts is having a strong negative effect on the income statement of Spanish banks. The sector recorded losses of more than 500 million in the first nine months of 2019 due to the sale of currencies other than the euro.

Specifically, the red numbers suffered by the operation with foreign money amounted to 535 million euros, an amount that contrasts with the profits that they usually obtain in a generalized way and that is the biggest hole since 2012, the worst year for the financial system of our country.

In the three quarters of last year the transactions caused the entities losses and were increasing, according to the published data of the Bank of Spain. In the first they reached 127 million; in the second, 194 million; and in the third, 214 million.

These red numbers include not only the buying and selling of currencies, but also the differences that arise when converting monetary items in foreign currency to the euro, when they are imputed to the account after their disposal.

Geopolitical conflicts

In 2019 the market has been extremely volatile as a result of the successive political and commercial conflicts between the United States with China and with some emerging countries, in addition to Brexit. In addition, different crises have affected regions where Spanish entities are very present, such as Argentina, Chile, United Kingdom or Turkey.

One of the currencies that has presented the greatest depreciation has been the Argentine peso for the return of Peronism to the Government. This currency collapsed in 2019 by 56% against the euro. The pound, which has fluctuated depending on the development of the Brexit negotiations, suffered a much lower decline, but throughout the year it registered significant variations. The currency of the United Kingdom fell 3.6% with respect to the money of the Old Continent.

The dollar, on the other hand, experienced a more pronounced stability, which has helped to make the handicaps noted by the financial sector less elevated. The US currency lost 1.75% of its value against the euro in 2019.

For this year, experts believe that volatility will be reduced, since the commercial war is expected to calm down and some sources of tension disappear. Therefore, they are committed to a rise in the currencies of emerging countries, mainly Asians. In Latin America they rely primarily on the Mexican peso. Already in 2019 advanced 2.5%.