How the financialization of regional savings banks contributed to the financial crisis in Spain

What is it about?

Dominant narratives of the sovereign debt crisis in Spain blamed regional savings bank’s old-style lending patterns and naïve management for creating a ‘traditional’ banking crisis which eventually caused their own demise and the wider financial crisis. Pressing this narrative, the Bank of Spain described the country’s finance as ‘plain vanilla’ – having standard products and practices only – to financial markets. This article provides an alternative explanation of how savings banks came to be at the centre of the financial crisis in Spain, by tracing their deregulation, financialization and stressing the relevance of the interconnectivities between regional financial communities and European financial markets.

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Why is it important?

This article offers a counterpoint to dominant narratives of the Spanish financial crisis and the role played by regional financial spaces. It shows that regional SBs became producers of securities and borrowers of cheap funds. In particular, and contrary to typical developments in the UK and elsewhere, the paper shows how it was not necessary for regional SBs to lose their mutual status for them to become vehicles for profit maximization, predatory lenders and producers of (Spain’s own) ‘toxic’ assets.