Savings bank (Spain)
European countries that adopted the Scottish savings bank model early on were those in which traditional Protestant values of self-help and the ideas of Jeremy Bentham and Thomas Malthus were particularly influential.
The Minister of the Interior Diego de Medrano introduced regulations by Royal Order on April 3, 1835, he was the first to authorize the establishment of savings banks in Spain.
The Spanish government clearly displayed a preference for initial investment to come from the private sector while individual institutions would provide for some form of guarantee to secure funds held in deposit.
These Mounts of Piety (a literal translation from "Montes de Piedad") were early modern charitable institutions where advances were made against some kind of collateral in pawn (usually, jewellery or clothes).
Like their counterparts in Scotland and France, Spanish savings banks briefly placed excess deposits at a government owned institution (Caja General de Consignaciones, 1852–1868).
This portfolio strategy was part of a change in government policy looking for greater intervention in the business of Spanish savings banks as well as providing financial aid to the recently created Caja de Dépositos y Consignaciones.
In particular, freedom (i.e., lack of detailed regulation) regarding investment policies created diversification and growth of assets at a greater rate than counterparts elsewhere in Europe.
During this period, the pawn and emergency loan operations of the Mount of Piety were unable to absorb all deposits made at the savings bank.
Diversification continued and by the outbreak of World War I, Spanish savings banks were readily issuing mortgages directly to retail customers.
These circumstances favoured geographical expansion throughout Spain of regional private commercial banks based in Madrid and the Basque Country.
During the 1920s assets in savings banks started to abandon their charitable nature and gradually turned into broader financial intermediation institutions.
Growth was limited because competitive pressure to find new opportunities within the private commercial banking sector resulted in a policy of expansion of the geographic scope of retail branches networks and diversification of sources of business.
Regulatory innovations put to an end the broad discretion that the directors of savings banks previously had and established specific and detailed guidelines whose use (and abuse) grew during the dictatorship of General Francisco Franco.
The Franco regime continued implementing a practice developed during the 1920s called the principle of territoriality, meaning that the business of each savings bank was restricted to its home province.
At the same time, the increasing asset base of the savings banks prompted the Finance Ministry to start regulating the sources and applications of their funds.
[4] The reasons why the cajas imploded can be traced back to a 1985 act which altered the composition of the governing bodies by trusting the boards of directors to political parties and trade unions.
