Bank Of Spain Research Articles

Financial Social Accounting Matrix: a useful tool for understanding the macro-financial linkages of an economy

ABSTRACTThis article extends the traditional methodology of social accounting by building a Financial Social Accounting Matrix (FSAM) and a corresponding Satellite Asset–Liability Matrix for Spain. In so doing, the difficulties that typically arise in consolidating data from the National Bureau of Statistics (INE) and the Bank of Spain (BdE) were overcome. This is the first FSAM for the Spanish economy and might provide new tools to deepen the analysis of the financial sector and of the determinants of financial vulnerability associated with interactions with other sectors of the economy. As a novel contribution to the literature, this paper incorporated a structural path analysis grounded in the FSAM multiplier to identify the principal paths through which financial shocks are transmitted.

Las cooperativas de crédito andaluzas en el siglo XX: origen y consolidación del sector

El principal objetivo de este artículo es analizar la evolución de las cooperativas de crédito andaluzas durante el siglo XX, estudiando el desarrollo dese su origen hasta la consolidación del sector en la década de los noventa. Las primeras entidades de este tipo en Andalucía surgen en los primeros años de esa centuria, con algo de retraso respecto a otros países europeos y con menos impulso que en otras zonas de España. A partir de entonces, se crean numerosas entidades de pequeña dimensión vinculadas, en su mayoría a Sindicatos Agrarios o como secciones de crédito de cooperativas agrícolas que no llegarían a adquirir la condición de entidad de crédito. Desde mediados de siglo, comienza a configurarse el sector andaluz de cajas rurales con instituciones que, en su mayoría, se mantienen operativas hasta finales de la centuria. El estudio de los primeros años de vida de estas sociedades no es fácil por la falta de documentación. Sin embargo, para el último cuarto del siglo la información es algo más completa gracias a la publicación, desde 1971 y bajo diversas denominaciones, del Anuario Estadístico de las Cooperativas de Crédito y Cajas Rurales y a la inclusión por parte del Banco de España del desglose provincial de actividad de estas entidades en su Boletín Estadístico. Tomando como base estas fuentes, además de otras informaciones, se realiza un estudio más detenido de la actividad de las cajas rurales andaluzas entre 1975 y 2000. Se diferencian dos áreas en la región (oriental y occidental) tratando de identificar rasgos distintivos en ambas.

Adapting Nonprofit Resources to New Social Demands: The Food Banks in Spain

Food banks make up an increasing phenomenon of nonprofit organizations answering to new social needs related to the global socioeconomic crisis. In order to explore if they are suitably adapting to their environments in Spain, one of the countries most seriously affected by the crisis in South Europe, this work assumes a hybrid qualitative–quantitative structure composed of an exploratory case study based on semi-structured interviews followed by a survey addressed to all the Spanish food banks. Much of the academic literature has concerned the appropriateness of food banks as a delivery mechanism in the context of welfare state withdrawal. This paper takes this in a different direction by examining Spanish food banks from an organizational management point of view. Wary of concerns about the institutionalization of food charity, on the one hand, and recognizing the escalating daily reliance on food banks, on the other, this paper seeks to address potential technical supply problems and challenges food banks face and open debate about the organizational networks of food banks more generally. The results show nonprofit entities based on a voluntary workforce who run supply chains in order to join both social and business targets. Their situation, performance, resources, mutual relationships and the links with other entities are described, paying special attention to the changes induced by the latest contextual changes. In short, food banks are efficiently organized and well established in their territories as a coherent social movement, although they should improve in their strategic view, coordination, resources and sources of these, to satisfy more adequately their increasingly complex demands.

Credit Risk Determinants in the Vulnerable Economies of Europe: Evidence from the Spanish Banking System

Purpose: The purpose of this paper is to investigate the determinants of non-performing loans in the Spanish banking system over the period 1997Q4–2015Q3. This timeframe includes not only the booming period for the Spanish economy but also an extended post-crises interval which is missing from other studies for Spain. Design/methodology/approach: Using quarterly data from the Central Bank of Spain and from the European Central Bank, the paper employs the ARDL approach to cointegration to identify the existence of a long or short-run relationship between NPLs and a set of macroeconomic, bank-related and country-specific indicators. Findings: Findings from the ARDL model indicate that macroeconomic, bank-specific variables and interest rates are important determinants of non-performing loans in the Spanish banking system. Specifically, the real GDP, the Spanish long-term government bond yield, the return on equity, the total credit granted by the Spanish banks and their capital to assets ratio, explain credit risk in Spain both in the short and the long run. Research limitations/implications: Data on the bank-specific variables are for the whole banking industry, and not for individual banks. If such data were available, a comparison of the credit risk determinants between small/ big banks, private/public or domestic/foreign could be possibly made. Originality/value: These findings provide useful evidence to bank managers and policymakers in dealing with loans' defaults in Spain and in undertaking crucial reforms to stabilize the economy.

Concentration of Credit Exposure as a Significant Source of Risk in Banking Activities: The Idea and Methods of Estimation

The simultaneous activation of many sources of risk can slow bank operations and even lead to bankruptcy. Credit risk is the greatest threat to the orderly functioning of a bank. To protect against its materialization banks spend nearly 90% of their total capital requirement. Concentration of credit exposure to single entities, as well as to single economic sectors, can be a source of additional risks. Estimation of the additional portion of the capital requirement in selected banks in Poland in 2008-2013 indicates that banks should assign additional 4% and 2% of the capital requirement to cover the risk of exposure concentrations in: respectively, individual entities and individual economic sectors. For banks with a retail profile more important was the risk of large exposures in individual economic sectors, and for banks with a corporate profile in individual entities. Estimates were carried out according to the procedure used by the Bank of Spain and the Bank of Slovenia, and the data derived from the annual financial reports of selected banks listed on the WSE.

Estimating direct effects of parental occupation on Spaniards\u2019 health by birth cohort

BackgroundSocial health inequalities in adult population are partly due to socioeconomic circumstances in childhood. A better understanding of how those circumstances affect health during adulthood may improve the opportunities for reducing health disparities. The objective of this study is to investigate the effect of parental socioeconomic status, which is proxied by occupation, on adult Spaniards’ health by birth cohort. The analysis will allow checking not only the direct impact of parental occupation on their offspring’s health, but also whether inherited inequality has been reduced over time.MethodsWe use data from the Bank of Spain’s Survey of Household Finances on Spanish households from 2002 to 2008. Sequential models were used to estimate the influence of the father’s and mother’s occupation on their offspring’s health, trying to disentangle direct from indirect effects. With a sample of 26,832 persons we consider effects for four different cohorts by birth periods ranging from 1916 to 1981.ResultsThe results show that parental occupation has a significant direct impact on individuals’ health (p < 0.01). The effect of father’s occupation exceeds that of mother’s. For those born before 1936, the probability of reporting a good health status ranges from 0.31 (95% confidence interval (CI) 0.14–0.48), when fathers were classified as unskilled elementary workers, to 0.98 (95% CI 0.98–0.99) when they were managers or mid-level professionals. For those born during the period 1959–1975, those probabilities are 0.49 (95% CI 0.39–0.59) and 0.97 (95% CI 0.96–0.98), respectively. Therefore, health inequalities linked to parental socioeconomic status have been noticeably reduced, although discrimination against unskilled workers persists over time.ConclusionsGreat progress has been made in the health area during the twentieth century, so that the impact of parental socioeconomic status on individuals’ health has been significantly tempered for those at the bottom of the social scale. However, more efforts focused on the improvement of living conditions for most socioeconomically disadvantaged are needed in order to further reduce social inequalities in health.

Communication transparency in ethical and traditional banking in Spain

Transparency is a key value in the thinking of ethical banks, but do they perform different practices over traditional banking that justify or support that commitment to transparency? This study examines transparency in the communication process in two different types of banking in Spain: ethical/alternative banking and traditional banking. The identification of an explicit commitment to transparency, the analysis of disclosed information, the identification of information channels and the identification of stakeholders allow assessing transparency, which appears as a complex concept that has more to do with corporate philosophy rather than with the actions developed to achieve a greater transparency level, where the resources of the financial institution seem to prevail over the thinking of the organization. This exploratory study will contribute to the knowledge about ESG information disclosure in the banking industry, developing the identification of practices that improve transparency and will result in greater efficiency in decision-making processes.

Bank Restructuring, Competition, and Lending Supply: Evidence from the Spanish Banking Sector

This article analyses the effects of the bank restructuring process performed in Spain between 2010 and 2016. First, we create a unique dataset by combining information from Bankscope and the Table of Public Financial Assistance released by the Bank of Spain. Second, we investigate whether these reforms affected: (i) the stability, (ii) the degree of competition, and (iii) lending and liquidity supply of the Spanish banking industry. The main results suggest that the restructuring process reduced the degree of competition but increased financial stability in the Spanish banking industry. In particular, we find that two divergent forces affected the Spanish financial stability. On the one hand, the bail out dampened financial instability. On the other hand, the increasing bank market power fostered financial stability (i.e., lower risk-taking behaviour). Furthermore, we demonstrate that the restructuring process: (i) increased the Lerner index, (ii) did not increase the collusion among banks (iii) diminished the gap in cost efficiency between weak and healthy banks. Finally, we find that there are not improvements in lending and liquidity supply.

Stress test based on Oliver Wyman in Bank of Spain: an evaluation

This paper, based on econometric techniques, has done a study to improve the predictions of the stress test, concerning the estimation of impairment losses. The main results obtained are: 1) the impact of the explanatory variables on the impairment loss is different at stages of growth, compared to times of recession; 2) there is a certain inertia of the dependent variable, but this inertia is different in intensity, and even the sign in the growth stages concerning the stages of recession; 3) of the explanatory variables, nominal GDP and equity are those that have a greater impact on the impairment loss; 4) finally, the two dummy variables that assess the impact of adjustment to market value of assets in the process of mergers and acquisitions that occurred in 2010, and regulatory changes implemented in 2012, have been statistically significant and with the expected signs. Keywords: econometric techniques, financial crisis, financial markets, risks. JEL Classification: G21, G32, G17

Financial Exclusion and Branch Closures After the Great Recession

This paper analyzes the causes and consequences of closures of bank branches in terms of spatial accessibility after a negative shock in the demand for bank services, and whether closures concentrate in less-favored regions. We posit a theoretical framework to analyze markets with partial and total financial exclusion and derive testable empirical implications. Using data of the locations of Spanish bank branches before and after the bank restructuring (2007-2014), we find that the crisis has reduced the spatial accessibility to financial services, it has been heterogeneous across regions and it has been more acute in small municipalities, which might become banking deserts. The results show that the closures of branches respond to two factors. On the one hand, the general decrease in the demand for banking products. On the other hand, the larger reduction of the branch network of cajas compared to banks. Bailed-out cajas were forced to reduce their productive capacity to receive capital injections. As well as this, cajas were acting like microfinance banks in Spain and their transformation into profit-maximizing banks implied the closing of those branches that were providing services in low-income areas.

Relaciones hispano-paraguayas durante la Primera Guerra Mundial: el «Banco de España y Paraguay» en Asunción

In 1895, Spanish migrant Camilo Perez y Perez decided to settle in Asuncion, capital of the Republic of Paraguay, and was responsible for encouraging international relations through the creation of the «Bank of Spain and Paraguay». He was also named Revista Comercial Iberoamericana Mercurio correspondent and «Casa de America» representative, both Americanist entities established in Barcelona. The project came to an end few years later after World War I, and correspondence is nowadays preserved in the Pavilion of the Republic at University of Barcelona.

Las sociedades con valores pignorables por el Banco de España y la Gran Depresión

This article examines the physiognomy of the large non-financial Spanish companies during the crisis of 1929 using an original source, consisting of a compilation of accounting material from companies that had their values pledged by the Bank of Spain. The international literature teaches us that the crisis underpinned the flourishing of great companies; while the weakest ones disappeared, the modern companies survived. The large Spanish companies resembled and behaved similarly to European companies during the Depression. However, a duality may be observed in Spain between stable companies and other larger but more fragile ones. The obsolescence of some sectors, the volatility of international demand, the discretionary behaviour of public demand, and its own organisational performance, explain most of these differences.

Dual approach for modelling demand saturation levels in the automobile market. The Gompertz curve: Macro versus micro data

We propose the use of a dual approach for modelling the saturation levels in the automobile market. We combine macro data coming from a pool of observations corresponding to the vehicle fleet and per capita income in a broad set of countries, with micro data coming from the Survey of Household Finances, elaborated by the Banco de España (Bank of Spain) for the Spanish case. This double approach estimation allows taking advantage of both types of data, so that the results can be complemented for a more detailed understanding of the automobile market. Macro data capture the dynamics inherent to the process of diffusion in the automobile market as income per capita rises. Micro data are not affected by socio-institutional disparities at the country level and, at the same time, offer a much more detailed level of information in terms of vehicle owner characteristics.

Time banking in Spain. Exploring their structure, management and users´ profile

Time banks (TBs) have experienced significant growth in the last few years in Spain and have been incorporated in the agenda of political parties drawing the attention of national and international media as a solution to the economic crisis. Nevertheless, there is scant empirical evidence about this phenomenon in Spain. After describing the role of TBs in other countries, this paper examines the structure and management of TBs in Spain and develops a taxonomy of them. Additionally, it identifies the goals TBs pursue and the reasons why users join them. To do so, this paper uses a mixed-method approach consisting of in-depth interviews with 28 TB managers and an online survey of users (n=270). It concludes that TBs are a social-political project rather than a utilitarian-economic project, identifying differences between Spanish TBs and those in other countries.

Effect of internal controls on credit risk among listed Spanish banks

Purpose: The paper examines the effectiveness of internal control systems, explores the exposure of Spanish banks to the dangers of default as a result of internal control systems and establishes a relationship between internal controls and credit risk. Design/Methodology/Approach: Quantitative research approach is used to test hypotheses on the relationship between internal controls and credit risk among listed banks in Spain. Data from Bankscope and company websites from 2004-2013 were used. Generalized Least Squares (random effect) econometric estimation technique was used for the model. Findings: We find that internal control systems are in place but their effectiveness cannot be guaranteed. This exposes Spanish listed banks to serious default situations. There is significant effect of internal controls on credit risk especially the control environment, risk management, control activities and monitoring. The non-disclosure of material internal control weakness is a contributory factor to the ineffective internal control systems. There is however a perceived board ineffectiveness which does not augur well for effective internal control systems. Board characteristics for Spanish banks confirm the agency theory. Research Limitations and Implications: Data unavailability for certain years, variables and many inactive banks did not permit a larger sample size than expected. The use of quantitative variables lacks flexibility. Practical Implications: Bank management will find the work useful to ensure strict enforcement of internal control mechanisms and see it as both credit risk and operational risk issues. Central bank should hurry to compel banks to disclose material internal control weakness as provided in the reviewed COSO framework. Social Implications: Ineffective internal controls lead to credit risks, bank closure and loss of investments. Society suffers a lot from such losses and contagion. Disclosure of material internal control weakness is a social responsibility of banks. Originality/Value: The authors are yet to come across the use of purely quantitative variables to model the effect of elements of internal controls on credit risk. This study opens and adds a new dimension of internal controls not only to be seen as operational risk issue but also credit risk.

The Spanish corporate structure through interlocking directorates

The aim of this paper is to determine to what extent globalization pressures are changing interlocking directorate networks modeled on continental capitalism into Anglo-Saxon models. For this purpose we analyse the Spanish network of interlocks, comparing the present structure (2012) with that of 1993 and 2006. We show how, although Spanish corporative structure continues to display characteristics of the continental economies, some major banks are significantly reducing industrial activity. Nevertheless, the financial organizations continue to maintain a close relationship with sectors such as construction and services. The analysis of the network of directorates shows a retreat in activity of industrial banking in Spain. Two large Spanish financial institutions, BSCH and La Caixa, continue to undertake activities of industrial banking in 2006, but this activity is significantly reduced in 2012. According to the theories on the role of the interlocking directorates, the companies in these sectors assure their access to banking credit by incorporating advisors from financial organizations to their board of directors. We cannot conclude that the structure of the Spanish corporate network has become a new case of Anglo-Saxon structure, but we got indications that are becoming less hierarchic as banks seem to slowly abandon centrality positions. This is especially salient if we compare the networks of 2006 and 2012, which show a continuing decrease of the role of banks and insurance companies in the network.

Concentration of Credit Exposure as a Significant Source of Risk in Banking Activities: The Idea and Methods of Estimation

Abstract The simultaneous activation of many sources of risk can slow bank operations and even lead to bankruptcy. Credit risk is the greatest threat to the orderly functioning of a bank. To protect against its materialization banks spend nearly 90% of their total capital requirement. Concentration of credit exposure to single entities, as well as to single economic sectors, can be a source of additional risks. Estimation of the additional portion of the capital requirement in selected banks in Poland in 2008-2013 indicates that banks should assign additional 4% and 2% of the capital requirement to cover the risk of exposure concentrations in: respectively, individual entities and individual economic sectors. For banks with a retail profile more important was the risk of large exposures in individual economic sectors, and for banks with a corporate profile in individual entities. Estimates were carried out according to the procedure used by the Bank of Spain and the Bank of Slovenia, and the data derived from the annual financial reports of selected banks listed on the WSE.

Los intangibles en el cambio de entidad de los clientes de banca detallista

En este artículo se presentan implicaciones de gestión respecto al cambio de entidad de los clientes en banca detallista, identificando dos tipos de dimensiones de satisfacción: tangibles e intangibles. Esta novedad permite analizar la relevancia de los intangibles sobre la lealtad. Para ello, se llevó a cabo una encuesta postal aleatoria simple a 384 usuarios de banca detallista en España, incluyendo cuestiones sobre calidad de servicio, satisfacción y probabilidad de cambio en caso de insatisfacción en cada una de las dimensiones de calidad de servicio. Se demuestra la existencia de una relación inversa entre satisfacción y comportamiento de cambio. Las dimensiones utilizadas profundizan en la valoración de la importancia de los aspectos intangibles frente a los tradicionales tangibles: los primeros proporcionan una mayor oportunidad para fidelizar clientes.

Political connections, gender diversity and compensation policy

In this paper we analyze the influence of corporate governance, specifically political connections and gender diversity, on board and managers’ remuneration in savings banks in Spain. We also analyze whether financial experience moderates the relation between political experience and board compensation. To the best of our knowledge, the effects of having politicians on remuneration levels of financial firm have not been studied. Connections are important in hiring decisions and in generating business so it is interesting to explore whether they are important when it comes to compensation policies. We use a panel data and financial and corporate governance information from 44 savings banks for the period 2004–2009. Our results show that the previous political activity of the chairperson positively influences board remuneration. Our study provides the first evidence for a link between political connection and compensation policy, showing that, in addition to the standard firm-level factors, political and financial experience are material determinants of economic significance in compensation policies. Specifically, we show that financial expertise may substitute for governance mechanisms that are lacking in firms with weak governance environments (e.g. saving banks with high politicization).

Saving on a Rainy Day? Income Smoothing and Procyclicality of Loan‐Loss Provisions in Central European Banks

AbstractThis paper analyses income smoothing and cyclicality of loan‐loss provisions (LLP) in Central European banks. I provide strong empirical evidence that banks in the region use loan‐loss provisions to smooth their income streams, and that these provisions are procyclical with respect to national business cycles. In addition, I find that income smoothing may only partly be explained through the concept of ‘saving for a rainy day’. Banks do use periods of high earnings to smooth income, but they also elect to build further reserves during periods of heavy losses—that is, on the ‘rainy days’ themselves. This behaviour deepens existing losses and may obscure the bank's underlying profitability. Introducing regulatory measures in line with the Bank of Spain's dynamic provisioning system would make income smoothing in Central European banks more transparent and could limit the scope for discretionary provisioning during periods of low profitability.