Banking system Economy of Spain

bank of spain hqs in madrid

spanish private commercial banks played central role in spain s economic development, benefiting role state s creditor in 19th century, ability monetize public debt, , state-sanctioned oligopolistic arrangements lasted beginning of 20th century until late 1980s, when european rules forced liberalization of sector. has been argued favorable treatment received main spanish commercial banks , close relationship bank of spain (banco de españa) following end of franco regime allowed public-private partnership restructure large commercial banks 2 large banks (santander , bbva) purpose of preparing private institutions international competition , external expansion once european banking market integrated in 1992 alongside financial mercantilism benefiting commercial banking sector, spanish regulators allowed vast expansion of not profit savings banks sponsored regional governments became heavily exposed housing mortgage , real estate development sectors during spanish economic boom of 1999–2007.

prior 2010, spanish banking system had been credited 1 of solid of western banking systems in coping ongoing worldwide liquidity crisis, country s conservative banking rules , practices. banks required have high capital provisions , demand various guarantees , securities intending borrowers. allowed banks, particularly geographically , industrially diversified large banks bbva , santander, weather real estate deflation better expected. indeed, spain s large commercial banks have been able capitalize on strong position buy distressed banking assets elsewhere in europe , in united states.

nevertheless, unprecedented crisis of country s housing crisis, smaller local savings banks ( cajas ), had been delaying registering of bad loans, backed houses , land, avoid declaring losses. in june 2009 spanish government set banking bailout , reconstruction fund, fondo de reestructuración ordenada bancaria (frob), known in english fund orderly bank restructuring. in event, state intervention of local savings banks due default risk less feared. on 22 may 2010, banco de españa took on cajasur , part of national program put country s smaller banks on firm financial basis. on december 2011, spanish central bank, banco de españa (equivalent of federal reserve), forcibly took on caja mediterraneo , knwon cam, (regional bank) prevent financial collapse. international accounting firm, pricewaterhousecooper, estimated imbalance between cam s assets , debts of €3,500 million, not counting industrial corporation . troubled situation reached peak partial nationalization of bankia in may 2012. becoming clear mounting real estate losses of savings banks undermining confidence in country’s government bonds, aggravating sovereign debt crisis.

in june 2012, spain requested european funding of €41 billion recapitalize spanish banks need . not bailout in limited parts of banking business (a full-fledged bailout economy size of spanish have reached ten or twelve times amount). in return aid, there no tax or macroeconomic conditions. interest loan pay banks themselves. plan overseen imf, not place money. according statement of european ministers of finance, eurogroup closely monitor correction of economic imbalances .

as of 2017 cost of restructuring spain’s bankrupt savings banks estimated @ €60.7 billion, of €41.8 billion put state through frob , rest banking sector. total cost not understood until lenders still controlled state (bankia , bmn) newly privatized. in regard, 2017 spain considering merger of both banks , privatize combined bank recoup estimated 400 million euros of bailout costs.

during course of transformation period, regional savings banks such cam, catalunya banc, banco de valencia, novagalicia banco, unnim banc or cajasur have since merged and/or been absorbed bigger, more international, spanish banks, imposed better management practices , eliminated political interference.