Part IV Conduct and Culture, 22 The Spanish Banking Crisis as a Corporate Governance Problem

Subject(s):

Regulation of banks — Investment business

This chapter assesses the Spanish banking crisis. Spain experienced strong economic growth and a real estate boom during the first years of the century. Nevertheless, by the end of 2007, when the first signs of trouble appeared in the international financial markets, this phenomenal growth period in Spain had come to a halt. The banking crisis that ensued was exacerbated by three key factors. The first factor, which was common to other European countries, was the strong dependence of the Spanish banks on international debt markets. The second factor, common to all the Eurozone countries, was that, being part of the monetary union, Spain lacked a Lender-of-Last-Resort and the Bank of Spain was unable to offer liquidity when the crisis struck. Finally, the third factor, which was unique to the Spanish banking crisis, was the importance of the Caja de Ahorros in the Spanish banking system.