Report on the financial and banking crisis in Spain (Banco de España)
The Banco de España has issued a report about the financial and banking crisis in Spain (2008-2014). The purpose of this report is to offer an orderly and systematic analysis of the impact of the international financial crisis that commenced in 2007 on the Spanish financial system and of the set of regulatory, supervisory and intervention measures adopted during the period 2008-2014.
This report, which was coordinated by Fernando Eguidazu, a Banco de España council member, was drafted by the Directorate General Banking Supervision, the Directorate General Economics, Statistics and Research, the Directorate General Financial Stability, Regulation and Resolution, and the General Secretariat of the Banco de España.
The Banco de España has, through print and electronic means, provided the public with access to ample documentation on the international financial crisis that commenced in 2007. The purpose of this report is to offer an orderly and systematic analysis of its impact on the Spanish financial system and of the set of regulatory, supervisory and intervention measures adopted during the period 2008-2014.
A descriptive approach
The report uses a descriptive approach, analysing the development of the crisis and the actions carried out, with a view to providing broad references to readers and analysts. This report omprises five chapters and two annexes. The first four chapters are ordered chronologically, identifying four stages: the years of economic expansion (2000-2007), the onset of the crisis (2008-2011),
the worsening of the crisis (2012-2013) and the economic and financial normalisation (2014). Chapter 5 includes an assessment of the Spanish banking system’s restructuring process.
According to the report, the crisis can only be understood as a continuum, although different phases can be identified within each period. This classification has been adopted for clarity and because the stages identified mark significant changes in the economic cycle and in the restructuring process of the Spanish banking system, particularly the savings bank sector.
An analysis of the first period, spanning most of the years of economic expansion (2000-2007), is necessary to understand the build-up of imbalances and risks in the global, European and Spanish economies. The second period (2008-2011) is marked by the global financial crisis and by the policies adopted in response thereto, including an in-depth revision of financial regulations and the beginning of the clean-up and restructuring of the financial system. The third period (2012-2013) is characterised by the new measures adopted in view of the worsening of the crisis in Europe, resulting in the doubledip recession, the first symptoms of which had already appeared in 2011, and, as regards the regulatory framework in Spain, by the agreement with the EU on the financial sector, in the form of the Memorandum of Understanding signed in July 2012.
The report concludes in 2014, with the progressive normalisation of the economic situation and the launch of the Banking Union which entailed, from November that year, the transfer of a substantial portion of the supervisory powers of the Banco de España, as well as of the other participant supervisory national authorities, to the Single Supervisory Mechanism.
The same estructure
For the sake of a smooth narrative, all the chapters share the same structure. Each has four sections. The first section refers to the macroeconomic environment from an international, European and Spanish standpoint. It analyses macroeconomic developments and responses in respect of monetary and fiscal policy and of the institutional and structural reforms undertaken.
The second section of each chapter describes, for the corresponding period, the performance of the banking system through a detailed review of its main variables. There is a particular focus on developments in credit, an essential item of the financial system’s activity, including an analysis of the different types of borrowers and of credit quality, i.e. loans deemed non-performing and their related non-performing loan (NPL) and coverage ratios. Other variables of financial institutions’ balance sheets are also analysed, including government debt and, on the liabilities side, changes in funding raised: deposits, issues of securities (covered bonds) and asset securitisations. Changes in profitability are also analysed and the section concludes with solvency indicators, measuring resilience in terms of institutions’ loss-absorption capacity.