Includes special features of this country’s banking system and rules/laws that might impact U.S. business.
Last Published: 6/21/2019

Spain’s expansive and modern financial system is fully integrated with international financial markets. The system includes credit, stock and money markets, and specific markets for derivatives.
 
The banking system is regulated by the Secretary General of Treasury and Financial Policy, the Directorate General of International Trade and Investments in the Ministry of Economy and Competitiveness, and the Bank of Spain. Spanish legislation on bank incorporations is regulated by Royal Decree 1245, dated July 14, 1995.  When looking to set up a branch or representative office in Spain, foreign banks that have already been authorized in another EU member country do not need authorization from the Bank of Spain. Conditions of access to the Spanish financial system are the same for both Spanish and foreign companies.
 
The EU single market in banking and insurance services has changed the Spanish legal framework. Spain has adopted EU Directives that regulate the equity and solvency ratio of credit institutions and Council Directives on banking coordination. It has also adopted EU Directives on the securities market and insurance services. As Spain is a member of the Eurozone, it lacks traditional monetary policy tools; interest rates instead fluctuate in response to actions of the European Central Bank.

The banking industry in Spain expanded significantly during the country’s 15 years of rapid economic growth prior to Spain’s housing bubble and the international financial crisis, which forced Spain in 2012 to request EU bailout funds to recapitalize and restructure its financial sector.  In the run-up to the housing crisis of 2008, Spanish banking was dominated by regional savings banks (“cajas de ahorro”), which were often controlled by political interests and whose poor lending practices fueled the rapid growth of Spain’s housing bubble.  The Spanish government used the bailout in 2012 to close and recapitalize banks as well as shift bad assets into a bank specifically created to manage them.  As a result, Spain’s banking sector consolidated significantly; most of Spain’s regional savings banks have closed or merged.  Since the bailout, Spain’s banks have made significant progress deleveraging bad mortgages but are still cleaning up their balance sheets. After years of very tight lending in response to the real estate and financial crises, Spanish banks are slowly beginning to increase access to consumer and commercial credit.

Operators in the Spanish financial system

Supervised Institutions in Spain (254)

Credit institutions (198)

  • Banks.
  • Savings banks.
  • Credit co-operatives.
  • Branch offices of foreign credit institutions.

   Other institutions (52)
  • Specialised lending institutions.
  • Electronic money institutions.
  • Payment institutions.
  • Mutual guarantee and re-guarantee companies.
  • Currency exchange establishments authorised to buy and sell foreign currency.
  • Valuation companies.
  • Company for the management of assets from the restructuring of the banking system (SAREB).
  • Banking foundations.

Money Market Funds (3)

Central bank (1)

Source: Bank of Spain

Spain has one of the largest banking branch networks in the in the Eurozone despite significant consolidation of the sector in the past five years.  Given its still relatively high penetration of banks per capita and banks’ tight profit margins, analysts expect further consolidation of Spain’s banking sector.

Other credit entities
  • Credit financial establishments specialize in asset products such as leasing, lending, factoring, and mortgage loans. They cannot take public deposits.
  • ICO - Instituto de Crédito Oficial (Institute for Official Credit) serves as the State’s finance agency and investment bank. 
  • Investment institutions

Collective investment entities:
  • Investment companies dealing in marketable securities and property assets.
  • Investment funds dealing in marketable securities, money market assets, property assets, mortgage securities, pension plans and funds.
  • Venture capital funds and companies.
  • Other investment entities. 
Brokers 
  • Stock market: Stockbroker companies and agencies.
  • General: Banks, security management and deposit companies. 
  • Insurance and re-insurance companies and insurance brokers


Spain has improved its investment and brokerage entities. Governing investment entities are required to provide financial reporting to the public and recognize new types of investment organizations such as venture capital funds and companies. Spain has implemented tax relief measures in an effort to reduce extra costs involved in using this form of investment.
 
Money Market
The Bank of Spain bases Spain's money market essentially on the issuance of short-term securities, taken up by banks, finance companies and money market operators. The Spanish money market has become increasingly important in recent years after the system was made more liberal and flexible. The government debt market is also important in Spain, and both residents and foreigners invest in it. For non-residents, tax arrangements for investments in these securities are quite favorable.

Credit Market
The Spanish credit market is structured around private banks, which use their funds to provide financing for the private sector. These banks also operate as investors and underwriters in the stock market since they are able to adjust their liquidity by inter-bank and money market transactions. Liberalization of capital movement within the EU has made it easier for Spanish companies to obtain financing from abroad.
 
Stock Market
Bolsas y Mercados Españoles (BME) is the Spanish company that deals with the organizational aspects of the Spanish stock exchanges and financial markets, which includes the stock exchanges in Madrid, Barcelona, Bilbao and Valencia. BME has been a listed company since 14 July 2006 and a constituent of IBEX 35—the benchmark index for Spain’s principal stock exchange—since July 2007.

The Spanish system of market regulation is based on a British/U.S. model. Spain has a single computerized and centralized continuous stock market that penalizes insider trading. The National Stock Exchange Commission, CNMV, supervises the system and cooperates in developing its regulations.

The competitive securities market has a three-day settlement system. Trading on credit is permitted; new hedging instruments, index, and warrant options are available. The government has enacted stricter and more comprehensive regulations regarding takeover bids. Other positive developments in Spain’s stock market include establishment of futures and options markets, plus an unofficial second market for trading in fixed-income assets. These advances have made the Spanish securities market safer and more transparent.
 
Pension Plans and Insurance Companies
Security investment companies and funds in Spain have increased in recent years. Employers, associations, and financial entities are able to promote pension plans. These plans include favorable tax treatment and restrictions on use of funds before retirement, death or disability. Accumulated savings in pension plans may also be used in the event of long-duration unemployment or serious illness. Private insurance legislation, Law 30/1995, requires companies to formalize their pension plans with an external fund or insurance contract.

The life insurance market has also grown substantially in Spain. This is mostly due to the similarities between survival insurance contracts, which include favorable tax treatment, and traditional saving formulae. The government prohibits the sale of short-term survival insurance with low actuarial content. In recent years, international insurance companies have begun operating in Spain by forming subsidiaries and branch offices or by purchasing existing companies. In general, the companies have attained profitable results and excellent market positions.

Relevant data on the Spanish financial sector and a special section on the status of the financial sector reform and international assessments

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