The Banking Environment
Banking in general
The Spanish banking system is made up of three major groups of institutions: commercial banks, savings banks and credit co-operatives. The commercial banks are the most important group with just under two-thirds of total assets, followed by the savings banks with a third and the credit co-operatives with the balance. Spanish law does not establish functional differences between commercial and savings banks, so all are permitted to engage in any activity permitted under EC law. However, savings banks and credit co-operatives tend to concentrate their activities in specific geographical areas.
The largest banks are Banco Santander and Banco Bilbao Vizcaya Argentaria while the largest savings banks are La Caixa and Caja Madrid.
The Banco de España is the central bank and regulates all financial institutions in the country. With the advent of the Euro a key role of the Banco de España is co-ordination of the central monetary policy with the European Central Bank.
In general, all banking commissions are ad-valorem with a minimum but without maximum. Normally, big corporate and important customers negotiate the pricing in advance to open accounts.
Traditionally the standard commissions that the Spanish banks applied to transactions and customers are more expensive than the European Banks, mainly for the bureaucratic and administrative work that they have to support with the monetary authorities
Generally the same pricing is applied to residents as to non-residents. Some special exceptions exist related to operations for non-residents in Spain.
Resident and non-resident corporations may hold accounts in Spain that are denominated in Euro, US Dollar and other currencies. Credit balances can attract credit interest, although banks have to hold minimum reserves against such balances and this restricts the yield to the customer.
Overdrafts are permitted but are not generally used because of their high cost. Term loans (polizas de credito) and discounting bills are both available through commercial banks, which are the major source of short term funding. Commercial paper is available.
Time deposits have a minimum tenor of one month and certificates of deposit are not in common use. Treasury bills (letras de Tesoro) are issued for up to 18 months but can have an effective tenor of 1 day through repurchase agreements.
Currency
The unit of currency is the Euro (EUR).