Bank fees and charges: economic analysis, legal framework and relevance for financial stability

Abstract

This article analyses recent developments in Spanish banks’ fee and commission income and the related applicable legal framework. The main conclusions point to the increasing relevance of payment services, the overall rise in such income in Spain, in clear alignment with other European jurisdictions (though it still lags behind), and the role it can play in sustaining bank profits and solvency during economic downturns. There is also a trend towards the introduction of new charges. From a regulatory perspective, there are recent legislative initiatives that aim to guarantee ATM cash withdrawal services, to consider certain banking services universal, to bridge the digital gap and to ensure compliance with the statutory requirements concerning payment accounts with basic features. Nonetheless, the current legal framework does not grant the Banco de España any powers to authorise or overrule fees or charges or to limit their amount. While growing this income stream may have a positive impact on banking sector stability, it may also entail certain risks, such as the migration of customers to new digital operators, the impact on financial inclusion or the harm to credit institutions’ reputations.