Corporate Governance and Access to Finance - ESBG

The two biggest savings banks (La Caixa and Cajamadrid) rank 3rdand 4th in the Spanish financial system (which includes banks andco-operatives). The Spanish savings banks have made an importantcontribution to competition in the system, which underwent a profoundconcentration process in the 1990s. Had it not been by the role of thesavings banks in their respective regions, this concentration would haveentailed a decrease in competition. The Herfindal-Hirschman index forthe Spanish banking sector stands at 631 in 2008, indicative of a lowconcentration. When only banks are considered, the concentration indexalmost triples to 1,725 (CECA Social Responsibility Report 2008).According to their charter, Cajas are “profit-making” financial institutions,that is, private foundations created for the provision of financial services andthe satisfaction of the demand of the community. One of these objectivesis to foster saving, consistently with their originally principal activity.They also pay special attention to lending to households and SME, thanks totheir extensive and dense network of branches. Spanish Cajas participateactively in special financial institutions such as the Spanish MutualGuarantee Societies (Sociedades de Garantía Recíproca - SGR) that haveproven to be an effective tool to support collateral-less entrepreneur’saccess to finance through the provision of joint guarantees.Cajas have also been the main provider of mortgage finance for homeacquisition (with a 57 percent market share). The large exposure of someCajas to the building sector has affected them in a negative and severeway once this sector began to undergo major contraction in the recentglobal crisis context.Cajas are a good exponent of proximity banking, as shown by the factthat they are the only provider of financial services in over 14 percent ofthe municipalities in Spain (vis-à-vis just 0,5 percent for commercial banksand 3,50 percent for cooperatives). Moreover, 70 percent ofmunicipalities below 1,000 inhabitants that only have one provider offinancial services are attended exclusively by savings banks.Spanish savings banks have pursued a strong social orientation since theircreation. Cajas’ strategy of fighting against financial exclusion isstructured around three main pillars: proximity banking, adoption of newproducts and services to new realities aimed at servicing the financiallyexcluded and financial education.138