The On the whole it was a very complex

The most notable feature of the Spanish Banking sectorwas that the savings banks although only 45 in number, accounted for nearly 50%of the market share. Cajas as theywere called, were entirely a Spanish institution and there was no otherinstitution like it in any Western jurisdictions. These banks did not have anyparticular act governing them. in fact, they did not have any capitalrequirement. They were governed by the regional laws and were placed underregional powers. On the whole it was a very complex mechanism.

All of this was badly affected by the 2008 crisis. Thereal estate had a significant exposure in the banking sector. In addition tothis, as mentioned earlier, there was a general recession in the economy whichresulted in many institutions going into near insolvency situations if notentirely bankrupt. However, it must be noted, that the savings banks were theones affected very badly for the simple reason that they did not have anyproper back up.

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They comprised of only domestic investments out of which itcould be fair to say that a good portion was concentrated in real estate. Like many countries, the regulatory response in Spainwas done at the National as well as the European levels. The following were theissues that were addressed while coming up with a new regulatory framework:1.  Liquidity and solvency to banks2.  Restructuring alternatives3.  Provisioning requirements4.  Strengthening the savings banks5.

  Strengthening the general governance6.  Having higher capital requirements 7.  Changes in the supervisory architectureDuring the crisis, theState took over some banks and supported many others. Many banks had to berecapitalized and as a result the State ended up borrowing funds from theEuropean Union. The end result of all this was that the State entered into aMemorandum of Understanding with the European Union on the financial sectorpolicy.

A bad bank, commonly known as SAREB was created which was and continuesto be effective. The bottom line was that the Savings banks have almostdisappeared and the entire banking sector changed.