The Fall of Spanish Cajas: Lessons of Ownership and Governance for Banks

51 Pages Posted: 16 Dec 2014 Last revised: 18 Feb 2017

See all articles by Alfredo Martín‐Oliver

Alfredo Martín‐Oliver

University of the Balearic Islands

Sonia Ruano

Banco de España

Vicente Salas-Fumás

University of Zaragoza - Department of Business Administration and Organization

Date Written: February 17, 2017

Abstract

Ownership, governance, and institutional diversity among banks are a subject of public and regulatory concern. This paper addresses this issue by using a case study of Spain, where the retail banking market was split evenly between shareholder and stakeholder banks before the crisis. We examine how institutional diversity mattered in the accumulation of risk in the pre-crisis years, in the severity of losses caused by the crisis, and in the resilience to recover from the losses. The method of analysis consists in linking the risk position of the banks in the pre-crisis period and the losses arising during the crisis to the decisions of banks to migrate from business models based on deposit financing to models based on market-debt financing. We find that cajas migrated to more vulnerable business models following the strategy of the shareholder banks, but the losses in the crisis were much higher in the former than in the latter. The paper interprets this result as evidence that what matters the most about the ownership of banks is their resilience in bad times.

Keywords: Ownership of banks, governance, banking crisis, Spain, cajas, business models

JEL Classification: G21, G34

Suggested Citation

Martin-Oliver, Alfredo and Ruano, Sonia and Salas-Fumás, Vicente, The Fall of Spanish Cajas: Lessons of Ownership and Governance for Banks (February 17, 2017). Journal of Financial Stability, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2538471 or http://dx.doi.org/10.2139/ssrn.2538471

Alfredo Martin-Oliver (Contact Author)

University of the Balearic Islands ( email )

Crtra. Valldemossa, km 7.5
Ed. Jovellanos
Palma de Mallorca, Illles Balears 07122
Spain

Sonia Ruano

Banco de España ( email )

Madrid 28014
Spain

Vicente Salas-Fumás

University of Zaragoza - Department of Business Administration and Organization ( email )

Dr. Cerrada 1
5005 Zaragoza
Spain
+34 976 761803 (Phone)

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