Banking Industry in Spain

With the adoption of an economic policy that emphasized self-sufficiency and barred foreign investment capital and banking competition, the role of Banking Industry in Spain is strengthened. Subsequently, as industry grew stronger, many of the banks' equity holdings were sold to the public through stock exchanges. The banks, however, continued to play a vital role in providing new funds for industry. Banking system in Spain comprises of three main groups, private banks, savings banks, and official credit institutions. Commercial banks, which are larger and more numerous, served the general public; they were the principal source of short-term credit for the private sector, though they also competed for long-term loans. Mergers were undertaken with the government's encouragement in order to create large Spanish financial holdings that could adequately compete with their European rivals.

The second major group in the banking system consisted of savings banks, which predominated in rural areas that could not attract branches of the leading private banks. In terms of deposits, the Barcelona-based Caja de Pensiones para la Vejez y de Ahorros de Cataluna y Baleares, popularly known as La Caixa, was the country's largest savings bank. Another large savings bank was La Caja de Madrid. After the relevant restrictions were lifted, a large-scale merger process commenced among savings banks.

Spanish banking industry consisted of official credit institutions. These are under the control of the Directorate General for State Assets and they were supervised by the Official Credit Institute, which received funds from the state that were then lent to the credit institutions. The largest of these was the Industrial Credit Bank, which specialized in general industrial loans. The Mortgage Bank of Spain provided mortgage loans for urban and rural properties. The Agricultural Credit Bank provided credit for agriculture and related sectors. During the process of financial liberalization required by the EU, the government tried to promote a series of mergers within the banking industry, which it hoped could enable the banks to compete more effectively.

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