Corporate Governance and Access to Finance - ESBG

CASE STUDY 4:SPANISH SAVINGS BANKS 41Spanish savings banks (Cajas) are financial institutions assimilated tobanks in their operational capacity, while they maintain singular attributes incritical aspects such as (i) their legal nature, (ii) the composition of theirgoverning bodies and (iii) their regulation. The latter has two sources:(i) some aspects related to organizational issues (for example, theircorporate governance), depend on the regional governments; (ii) aspectsrelated to their condition as credit institutions (prudential regulation)depends on the central bank (Banco de España), whose regulation andsupervision of Cajas is harmonised with that of commercial banks.Savings banks are private foundations with a social mission related topublic interest and subject to market financial performance standards.A fairly singular feature is the allocation of a percentage of their profits to“community welfare activities and projects”, the Obra Social. A minimumof 50 percent of after tax profits should be retained as reserves, and therest is assigned to Obra Social. On average in the last decade the ObraSocial has received between 20 percent and 30 percent of the profits,over 1,600 million euro only in 2008.Cajas are specialized in channelling popular savings to finance retailclients and SME. They have strong local roots and a dense network ofbranches, which have expanded considerably since a 1988 law eliminatedthe legal restrictions to geographical expansion beyond their region.The origins of Spanish Savings Banks go back to the 18th century and thethen popular Montes de Piedad (pawnshops). The first Spanish savingsbanks were born in the 1830s with a mission of fighting usury,channelling savings towards reasonable investments, and developingsocial activities in their own region. Many of them were then sponsoredand founded by catholic organizations and/or the municipalities.Modern savings banks offer a complete range of products and services totheir clients. As of end 2009 they had a market share of 47 percent in theprovision of credit and 48 percent in savings products 42 .41 In July 2010, when this report was in an advance stage of production, the Spanishgovernment approved a reform of the Law regulating saving banks, with importantimplications in terms of corporate governance. These proposed changes are not includedin the case study.42 Source: CECA, www.cajasdeahorros.es/instantanea.htm, December 2009.137