Past Event

The Spanish financial crisis: Lessons for the European banking union

Spain is among the countries still recovering from the financial crisis. While misjudged investments were part of the cause, these past mistakes could offer lessons for the European banking union.

Date: June 9, 2016, 1:00 pm Finance & Financial Regulation Tags & Topics

Summary

See below for video and audio recording of the event

The event began with an overview of the report by the Elcano Royal Institute on the Spanish banking crisis and the possible lessons for the European banking union.

The researchers offered their analysis of the Spanish crisis and its causes, focusing in particular on credit expansion, wholesale inter-banking funding and poorly managed public savings banks. They also pointed out that the ex-post policy response came too late. While it was hoping for an automatic recovery that never came, it was a misguided attempt and eventually led to an even weaker financial system.

Continuing from this point, the discussion then concentrated on the lessons that can be extracted from the Spanish financial crisis. The main question here is, to what extent the potential policy measures could be taken to a European level to prevent such an episode from repeating itself.
Although banking crises occur from time to time and are often linked to relatively similar causes, i.e. financial euphoria, credit growth or real-estate bubbles, we do not seem to learn from them.

Once the crisis hit the Eurozone, the Spanish authorities encouraged mergers between healthy and troubled institutions. This led to a weaker domestic banking system which eventually had to receive public intervention. This also shows how the misdiagnosis partially worsened the economic crisis. Moreover, the Spanish example shows that even small saving banks can lead to systemic crises, especially when their supervision is inadequate. Last but not least, although bail-in measures are now in place and should enhance banks resilience to financial distress, a common fiscal backstop is needed to top up, in case bail-in loss-absorption capacity is not enough.

The conference concluded with several questions. First of all, it was asked whether the European financial assistance was needed at all, given its relatively small amount of 42 billion euros, representing around 4% of the Spanish GDP. Secondly, given the clear hints that the Spanish economy was delivering, seen by the rise in house prices and current account deficit, why did policy makers not try to address the situation?
Regarding the first question it was said that, although the relative amount was not high, it was probably also used as a political instrument for Spanish authorities to implement fiscal consolidation. Then, concerning the question about the delayed actions of policy makers, the speakers argued that it is always easier to ‘predict’ ex-post. However, since the existence of large current account imbalances within a single currency area without a fiscal union had no comparable benchmark, it was not easy to link these imbalances with the emergence of a housing bubble at that time.

Event summary by Jaume Martí Romero, Research Intern

VIDEO RECORDING


 

Relevant Reading

The Spanish financial crisis: Lessons for the European Banking Union | Miguel Otero-Iglesias, Sebastián Royo, Federico Steinberg

More Bruegel work on banking union

Schedule

Jun 9, 2016

12:30 - 13:00

Check-in and lunch

13:00 - 13:25

Presentation: The Spanish banking crisis

Miguel Otero-Iglesias, Senior Analyst, Elcano Royal Institute

Federico Steinberg, Senior Analyst, Elcano Royal Institute

13:25 - 14:30

Panel discussion and audience Q&A

Chair: Pia Hüttl, Affiliate Fellow

Stefano Neri, Head of Division Research Department , Bank of Italy

Speakers to be confirmed

14:30

End

Speakers

Miguel_Otero_Iglesias IMG

Miguel Otero-Iglesias

Senior Analyst, Elcano Royal Institute

Federico_Steinberg IMG

Federico Steinberg

Senior Analyst, Elcano Royal Institute

Pia Hüttl

Pia Hüttl

Affiliate Fellow

Neri picture

Stefano Neri

Head of Division Research Department , Bank of Italy

Location & Contact

Bruegel, Rue de la Charité 33, 1210 Brussels

Bryn Watkins

Bryn Watkins

bryn.watkins@bruegel.org +32 2 227 42 88

Read about event More on this topic

Past Event

Past Event

Artificial intelligence: challenges and opportunities

Rob Atkinson, the founder and president of the Information Technology and Innovation Foundation presented his research work on the impact of artificial intelligence on our lives.

Speakers: Robert Atkinson, Anna Byhovskaya, Merja Kyllönen and Georgios Petropoulos Topic: Innovation & Competition Policy Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: March 23, 2017
Read about event More on this topic

Past Event

Past Event

Conversations on the future of Europe

On the occasion of the 60th anniversary of the signing of the Treaty of Rome, we held an event of four conversations between Bruegel scholars and European thinkers.

Speakers: Maria Demertzis, Ivan Krastev, Emmanuel Mourlon-Druol, Johanna Nyman, André Sapir, Catherine Schenk, Andre Wilkens and Guntram B. Wolff Topic: European Macroeconomics & Governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: March 22, 2017
Read article Download PDF More on this topic More by this author

Policy Contribution

PC 07 2017 cover

What happened to global banking after the crisis?

The global financial crisis allegedly led to the end of global banking. However, Dirk Schoenmaker finds that reports of the demise of global banking are premature.

By: Dirk Schoenmaker Topic: Finance & Financial Regulation Date: March 14, 2017
Read about event More on this topic

Past Event

Past Event

Intellectual Property and Competition Policy in Europe and Japan

Intellectual property (IP) is a cornerstone for incentivising innovation initiatives. It defines a framework within which firms and individuals can produce creations of intellect.

Speakers: Peter Alexiadis, Reiko Aoki, Michael Koenig, Kai-Uwe Kühn and Georgios Petropoulos Topic: Innovation & Competition Policy Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: March 14, 2017
Read article More on this topic More by this author

Podcast

Podcast

Banks and borrowers in distress — Europe's NPL crisis

European banks are struggling with high amounts of non-performing loans. We look at the reasons behind this crisis, and how it affects banks, borrowers and the European economy as a whole. Finally, we explore potential solutions.

By: The Sound of Economics Topic: Finance & Financial Regulation Date: March 10, 2017
Read article More on this topic

Blog Post

Schoenmaker pic
Nicolas Véron

Brexit should drive integration of EU capital markets

Brexit offers EU-27 countries a chance to take some of London’s financial services activity. But there is also a risk of market fragmentation, which could lead to less effective supervision and higher borrowing costs. To get the most out of Brexit, the EU financial sector needs a beefed up ESMA.

By: Dirk Schoenmaker and Nicolas Véron Topic: Finance & Financial Regulation Date: February 24, 2017
Read about event More on this topic

Past Event

Past Event

Different perspectives on Nord Stream II

At this event, we bruoght together key-experts that studied the regulatory and economic aspects of Nord Stream II

Speakers: Severin Fischer, Siobhan Hall, Alan Riley, Szymon Polak, Sebastian Sass, Simon Schulte, Borbála Takácsné Tóth and Georg Zachmann Topic: Energy & Climate Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: February 21, 2017
Read about event More on this topic

Past Event

Past Event

Financing the Belt and Road Initiative

The Belt and Road initiative, recently embarked on by China, aims to improve cross-border infrastructure in order to reduce transportation costs across a massive geographical area between China and Europe.

Speakers: Alicia García-Herrero, SUN Mingxi, Jianwei Xu, Alessandro Carano and Sue Anne Tay Topic: Global Economics & Governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: February 9, 2017
Read article Download PDF More on this topic

Policy Brief

PB 17 01

Making the best of Brexit for the EU27 financial system

The EU27 needs to upgrade its financial surveillance architecture to minimise the financial market fragmentation resulting from Brexit and the corresponding increase in borrowing costs for firms.

By: André Sapir, Dirk Schoenmaker and Nicolas Véron Topic: Finance & Financial Regulation Date: February 8, 2017
Read article More on this topic

Blog Post

MariaDemertzis1 bw
sd-12177-_0028bea2-web

Bruegel conference discusses strategies to tackle Europe’s NPL crisis

Bad loans and private sector debt distress are widely acknowledged to hold back investment and growth in Europe. It was good, then, to hear ECB Vice-President Vítor Constâncio call for a comprehensive strategy to address the non-performing loans problem at an event hosted by Bruegel last week.

By: Maria Demertzis and Alexander Lehmann Topic: Finance & Financial Regulation Date: February 7, 2017
Read about event

Past Event

Past Event

Brexit and trade: what EU and WTO rules imply

Bruegel in collaboration with Leuven Centre For Global Governance Studies organizes an event at which we will discuss the options for redesigning trade relations in the post-Brexit era.

Speakers: Viktoria Dendrinou, Hosuk Lee-Makiyama, Petros C. Mavroidis, André Sapir and Prof. Jan Wouters Topic: European Macroeconomics & Governance, Global Economics & Governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: February 6, 2017
Read about event More on this topic

Past Event

Past Event

State Aid and Tax Rulings

When do national tax rulings violate EU state aid rules? Does the European Commission's approach raise concerns about Member State Sovereignity and what is the impact on corporate investments in Europe?

Speakers: Clemens Fuest, Damien Neven, Gert-Jan Koopman, Nicole Robins and Guntram B. Wolff Topic: Innovation & Competition Policy Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: February 1, 2017
Load more posts