The agreement does not guarantee higher profits for Andorran banks and will open the door to European competition

Presenting the association agreement with the European Union as a necessity for Andorran banks overlooks relevant aspects of the debate: Andorra reportedly already has a lender-of-last-resort mechanism, and even Andbank’s CEO, Carlos Aso, publicly stated that his group does not need the agreement to conduct its business.

These points require a more nuanced assessment of analyses linking association to the creation of a previously nonexistent financial safety net and a guaranteed improvement in banks’ profitability.

A mechanism in place since 2022

The International Monetary Fund (IMF) notes, in the findings of its 2025 consultation on Andorra, that the country introduced a lender-of-last-resort mechanism in 2022.

The institution advocates complementing it with close supervision and an appropriate resolution framework to identify and address problems at banks. This is set out in its assessment of Andorra’s financial system.

Therefore, claiming that having a lender of last resort will only be possible through the association agreement is incorrect if the mechanism is being discussed in general terms.

Direct access to a central bank’s liquidity facilities is a separate matter. The IMF explicitly distinguishes between the Andorran mechanism and access to ECB refinancing, which Andorran banks do not have directly.

The existing support is intended to help a solvent institution experiencing temporary liquidity difficulties, but it is not equivalent to central bank backing. This distinction appears in the study Andorra’s Banking Sector: Opportunities and Risks.

The existence of the domestic mechanism, its limitations and potential access to other facilities are issues that must be explained separately.

Aso: “At Andbank, we do not need the association agreement”

The debate over the business need for the agreement also finds a counterpoint in statements by Andbank’s chief executive. As La Veu Lliure reported on 18 May, Carlos Aso said on the programme Avui serà un bon dia: “At Andbank, we do not need the association agreement.”

Aso also rejected framing the debate around fears of retaliation or the idea of a last chance. He emphasised growth opportunities and the size of the European market.

These statements do not support portraying Andbank as an institution that depends on the agreement to continue operating or developing its business. Nor can they automatically be extended to every bank in the country.

Opening up would also bring greater competition

The IMF identifies opportunities in association, such as easier expansion into the single market through financial passporting. However, it also notes that the entry of European banks into Andorra could significantly alter the sector’s structure, and that banks should prepare to face greater competition. It sets this out in the same study on Andorran banking.

This two-way opening means it cannot be assumed that all the effects on existing banks would be favourable. Opportunities for expansion would coexist with new competitors and the need to adapt.

Creand’s CEO, Xavier Cornella, has also highlighted the opportunities offered by economic opening and the agreement, while stressing that the process brings challenges that must be addressed gradually and with planning, according to statements reported by La Veu Lliure in June.

Cornella said the agreement could accelerate the arrival of foreign banks and mergers among Andorran banks. The entry of competitors with decades of experience applying EU regulations could intensify competitive pressure on the Principality’s banks and encourage consolidation.

In this scenario, some banks could lose their independence through mergers or takeovers, a possibility that calls into question any portrayal of association solely as a means of improving existing institutions’ profits.

Improved profitability is a forecast, not a guarantee

The possibility that broader liquidity support could lower funding costs or enable banks to reorganise their resources may form part of an economic analysis. It does not, in itself, demonstrate that the agreement guarantees these outcomes or that all banks would benefit equally.

To support that conclusion, it would be necessary to specify which mechanism would be activated, under what conditions and at what cost, and how its effects would interact with those of competition and regulatory obligations.

The available documentation and statements establish two points: Andorra reportedly already has an emergency liquidity mechanism through other channels, and banks have argued that they do not need the agreement. In summary, the potential future benefits of association must be explained as conditional expectations, without turning them into guarantees.