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THE STRUCTURE OF THE SPANISH FINANCIAL SYSTEM. José Luis Malo de Molina Banco de España. Director General. ICO’s International Executive Training Programme in Development Banking ICO. 31 March 2003. THE TRANSFORMATION OF THE SPANISH FINANCIAL SYSTEM. - PowerPoint PPT Presentation
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BANCO DE ESPAÑA
THE STRUCTURE OF THE SPANISH THE STRUCTURE OF THE SPANISH FINANCIAL SYSTEMFINANCIAL SYSTEM
José Luis Malo de MolinaBanco de España. Director General
ICO’s International Executive Training Programme in Development Banking
ICO. 31 March 2003
2
Banco de España - Servicio de Estudios
THE TRANSFORMATION OF THE SPANISH FINANCIAL THE TRANSFORMATION OF THE SPANISH FINANCIAL SYSTEMSYSTEM
In the early 80s the Spanish financial system was rigid, underdeveloped,
closed and heavily intervened. But it has since changed drastically
Two main (interlinked) driving factors:
Changes in the macroeconomic environment
Changes in financial regulation
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CHANGES IN THE MACROECONOMIC ENVIRONMENTCHANGES IN THE MACROECONOMIC ENVIRONMENT
High inflation, increasing fiscal deficit and interest rate volatility fostered
financial innovation
At the same time fostered stabilisation policies:
Decisive anti-inflationary orientation of monetary policy, which
gradually gained credibility
Fiscal consolidation plan, which received further impulse from the
run up to EMU
Spain joined EEC in 1986 and the Peseta entered the ERM in 1989
As a positive result of those policies, Spain successfully completed its
nominal convergence process by being included among the first group of
countries forming the EMU in 1999
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CHANGES IN FINANCIAL REGULATIONCHANGES IN FINANCIAL REGULATION
1980s Prudential supervision framework completed: Banco de España
(credit institutions) newly created CNMV (securities) and DGS (insurances)
Bank rates and charges and commissions in securities markets fully liberalised
Capital movements partially liberalised Book-entry public debt market comes into operation
1990s Second Banking Directive transposed (freedom to establish and
provide banking services) Compulsory investment requirements on banks lifted and reserve
requirement markedly reduced Capital movements fully liberalised Full freedom to establish and provide financial services
2000s Investor compensation system created New measures on transparency and good practices
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THE SPANISH FINANCIAL SYSTEM IN 2003THE SPANISH FINANCIAL SYSTEM IN 2003
As a result the Spanish financial system is today a flexible developed
and internationally active system well in line with those of other
continental European countries
Let us briefly review its main features
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A BANK-BASED SYSTEMA BANK-BASED SYSTEM
Share of deposits in household financial assets in Spain: Similar to the EMU average Higher than in the USA
SPAIN
34%
14%
7%
45%
EMU
30%23%
44%
3%
Deposits Securities Insurance Other
USA
15%
30%
1%
54%
HOUSEHOLD FINANCIAL ASSETS
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A BANK-BASED SYSTEMA BANK-BASED SYSTEM
Spanish corporations mainly use bank credit to cover their debt finance Share of loans is similar to the EMU average and higher than in the
USA Share of fixed income is similar to the EMU average and lower than in
the USA
SPAIN
24%
51%
22%
1%
2%
EMU
27%
55%
12%
3%
3%
Loans Fixed income Equity Trade credits Other
USA
15%1%
51%27%
6%
NON-FINANCIAL CORPORATIONS FINANCIAL LIABILITIES
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THE BANKING SYSTEMTHE BANKING SYSTEM
Healthy, internationally active and compares favourably with the EMU average
1995 2001
176.6 193.0 260.0 64.6
0.81 0.70 2.45 3.36
10.9 15.4 11.3 15.7
Solvency ratio (Total) 11.9 11.0 10.7 12.4
Solvency ratio (Tier1) 10.3 8.7 7.7 9.6
Provisions/ Doubtful assets 71.0 201.9 95.6 171.7
Efficiency ratio 68.8 61.4 65.6 56.9
Foreign claims (%GDP) 11.9 59.3 79.3 8.7
Spain
Number of institutions per 100,000 inhabitants
EMU USA
Total assets (%GDP)
ROE (after tax)
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THE BANKING SYSTEMTHE BANKING SYSTEM
Although there are some differences among different types of institutions
Commercial banks Savings banks Cooperative banks
146 47 88
102.4 69.0 6.8
123.5 73.3 7.0
15.7 12.7 9.9
Solvency ratio 9.5 11.5 11.1
Percentage of business abroad 30.3 1.7 0.0
172.1 222.0 155.8
Efficiency ratio 59.0 62.2 62.0
Number of institutions
ROE (after tax)
Total assets (non-consol.) (%GDP)Total assets (consol.) (%GDP)
Provisions/ Doubtful assets
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OTHER INTERMEDIARIESOTHER INTERMEDIARIES
Institutional investment is lagging behind the EMU average and the USA…
020406080
100120140160180200
SPAIN EMU USA
020406080100120140160180200
INSURANCE COMPANIES
MUTUAL FUNDS
PENSION FUNDS
% GDP % GDP
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OTHER INTERMEDIARIESOTHER INTERMEDIARIES
… but has grown significantly over the 90s
0
10
20
30
40
50
60
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
0
10
20
30
40
50
60INSURANCE COMPANIES
MUTUAL FUNDS
PENSION FUNDS
% GDP % GDPTOTAL ASSETS
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FINANCIAL MARKETSFINANCIAL MARKETS
The organisation of financial markets has evolved from a segmented structure to a consolidated one:
Interconnection of stock exchanges MEFF-AIAF-SENAF platform Merger of SCLV and CADE
SCLV CADE
STOCK MARKET MANAGEMENT COMPANIES
Open outcry trading
SPANISH STOCK
MARKET INTERCONNEC
TINGSYSTEM
MEFF-AIAF-SENAF holding mercados financieros, SA
BOLSAS Y MERCADOS ESPAÑOLES sociedad holding mercados y sistemas financieros, SA
AIAF SENAF
MEFF HOLDING
MEFF FIXEDINCOME
MEFFEQUITIES
Governingbodies
Trading
centres
MADRID BARCELONA
BILBAO VALENCIA
MEFFCLEARING
HOUSE
IBERCLEAR
Clearingand
settlementof securities
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FINANCIAL MARKETSFINANCIAL MARKETS
The relative size of the stock exchange and public debt market is similar to the EMU average but smaller than in the USA
The relative size of the private debt market is smaller than in both the EMU and the USA
0
20
40
60
80
100
120
SPAIN EMU USA
0
20
40
60
80
100
120 STOCK EXCHANGE CAPITALISATION
PUBLIC DEBT. OUTSTANDING AMOUNTS
PRIVATE DEBT. OUTSTANDING AMOUNTS
SIZE% GDP % GDP
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FINANCIAL MARKETSFINANCIAL MARKETS
Public debt market is by far the most active and liquid exchange in Spain
0
50
100
150
200
250
300
350
0
50
100
150
200
250
300
350
STOCK EXCHANGE EQUITIES
PUBLIC DEBT
DERIVATIVES MARKETS. EQUITIES
OTHER FIXED-INCOME MARKETS
ANNUAL TURNOVER% GDP % GDP
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FINANCIAL MARKETSFINANCIAL MARKETS
Spanish financial markets show a high degree of internationalisation
0
10
20
30
40
50
60
0
10
20
30
40
50
60 STOCKEXCHANGE
DERIVATIVESMARKETS.EQUITIES
SHARE OF TURNOVER BY NON-RESIDENTS% %
0
10
20
30
40
50
60
0
10
20
30
40
50
60 STOCK EXCHANGE EQUITIES
PUBLIC DEBT
PRIVATE DEBT
OUSTANDING AMOUNTS HELD BY NON-RESIDENTS% %
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FINAL REMARKSFINAL REMARKS
The Spanish financial system is currently a developed, internationalised and healthy system
It is still mainly a bank-based system although both other intermediaries and markets are gaining momentum
Banks’ health and market consolidation place the Spanish financial system in a good position to face the challenges of financial globalisation
