by Stefanie Claudia Müller

Professor Juan José Duran Herrera says in his foreword to the book Gestión de riesgos financieros en la banca internacional that financial stability is an “intangible asset of great social value” that has to be guaranteed not only by supervisors and governments but also by financial institutions… Corruption and fierce speculation has destroyed the trust the banking business is based on.

It is therefore of public interest the role of banks and savings banks in our economic system and in our society to manage such scarse resources. At the end customers (savers) are the creditors of the banks, because in case of a S not only investors and shareholders lose, they also lose. Therefore risk taking by financial institutions should be transparent to all customers the same as a publicly traded company that has to justify its accounts and its strategy to shareholders at annual meetings.

Banking sector: Corruption – No pain no gain – no control

In this financial crisis we have seen that the impact also reaches society, that pays the consequences of mismanagement of savings banks and banks with tax increases or a waiver of benefits for the Government to save entities with liquidity problems. This makes that a bank is different from a store or a restaurant, where the customer relationship is temporary.

The economic impact of the bankruptcy of a financial institution is much bigger. It is precisely why the financial crisis that we are living has elongated and needed recovery of deep reforms that we want to discuss in this paper.

In my doctoral thesis I have investigated on the role played by financial institutions in the process of economic growth in Spain from 1996 to 2008. We have tried to know what risk management had failed to get to experience one of the worst financial crisis in Spanish history. The thesis presents an international focus mainly European, with a comparison of the situation in recent financial risks in Spain with the one in Germany, leading economic partner in Europe. The time frame of the analysis of the whole thesis is from 1996-2013.

Banks: The savings banks are dead, long live the banking foundations

Regarding the role of the Spanish savings banks is considered key to this investigation by the fact that 70 percent of its business concentrated in passive before the crisis in the Bank of Spain defines as “other resident sectors” (otros sectores residentes – OSR): nonfinancial corporations, households and non-profit institutions serving households. This makes them highly dependent on the national economic situation and moreover increases its importance for the whole society.

Spanish banks had liabilities in 50 percent aimed at OSR. Chapter I and II talk about the economic environment of the main entities and their impact on it, the interplay and at the same time, the dependence on external funding is studied, especially from Germany. The analytical part of the economic environment is based on the analysis of relevant scientific publications and relevant official statistics.

In Chapter II we analyze the risk management of the five largest financial institutions in Spain through their balance sheets. we chose Banco Santander, BBVA, La Caixa / CaixaBank, Banco Popular and Caja Madrid / Bankia to be the most important in the time frame we have investigated here (from 1996 to 2013).

For we have analized the databases of their web pages and records of the National Securities Market Commission (Comisión Nacional del Mercado de Valores – CNMV), and the balance sheets of the institutions themselves and volume ratios as credit, late payments, gains, losses and operation and trading margins. These criteria were chosen for being highly related to risk management and a predominant risk in the retail banking: default.

Saving banks: The analysis is intended to find answers to the following questions

  1. To what extent the savings banks and banks granted loans with benevolent conditions?
  2. How has the policy provisions been and from when has it increased risks in financial institutions and with what consequences?
  3. Have financial institutions reported to their clients on real estate oversupply?

In Chapter III we make a comparison of crisis management within banks and savings banks in Spain with the situation in Germany (2007-2013); that is made to see whether the German financial market is more transparent and more or less full of risks as it can be deduced from our analysis.

The summary of my thesis: Without ethics any model of risk control can work in banking.

Thesis: Cajas, Bancos y gestión de riesgo en España, 1996-2013. Una comparación con Alemania. Nov. 2015. Phd. Stefanie Claudia Müller