The increase in the number of savings banks branches during the economic expansion from the end of the 90s until 2008 would have had no positive effects on the increase of the Spanish regional economic growth. A study published by four professors from the Valencian universities and the University of Jaume I of Castellón, and the Valencian Institute of Economical Investigations (IVIE) highlights that the most developed areas have not shown positive effects of most offices.
The research starts from the reduction or the near disappearance of restriction on the savings banks in order to open branches in other regions, from the beginning of the economic boom and until 2008. This deregulation spread around the Spanish geography and, in the case of this research, it is focused in the study of the impact of the expansion in different geographical areas to the original ones of the savings banks.
The increase in the number of bank branches, according to researchers, “far from generating positive effects through a higher competence in the banking sector, diversification of investment and reduction of the risk or more capital mobility, among other factors, it would have contributed to the economic expansion to have weaker basis in terms of productivity and a worse resource allocation”, says José Manuel Pastor, professor of Economic Analysis of the Universitat de València, researcher of the IVIE, and one of the authors of the work.
The causes of these weakness, according to researchers, are the investment to create new bank branches in different provinces and the original ones, what caused “a worst resources allocation, projects with poorly assessed risks on the part of savings banks with less local information and the need to grow rapidly in new less known markets”, says Pastor, who is also dean of the Faculty of Economics of the UV. “With the arrival of the boom, the consequences were serious for Spain and its provinces as well as for the savings banks themselves”, says.
The work now published highlights the “key role” that the saving banks have, and the role they have played in the deep crisis of the Spanish economy initiated almost a decade ago and whose effects are still very profound. Moreover, the presence of the savings banks during this phase led to a concentration of those in the economically most prosperous regions.
“The analysis of the effects of the geographical liberalization of the savings banks in Spain is important with a view to try to avoid similar situations in the future, designing appropriate regulations (or deregulations) of the financial sector. For example, the case of savings banks shows that certain deregulations in specific fields could need more regulation or better supervision in other aspects in order to yield good results”, concludes José Manuel Pastor.
According to the research, the function of the savings banks during the bank deregulation has only been studied until now in the United States, and with inconclusive results, while in the case of the European ones it has not received the same attention.
The article published by José Manuel Pastor, José Manuel Pavía, Lorenzo Serrano and Emili Tortosa-Ausina, Rich regions, by regions and bank branch deregulation in Spain, combines the knowledge of professionals in areas such as regional economy; statistical techniques of different economic areas; banking regulation and its institution; as well as bank economy and growing economy.
Furthermore, it uses econometric techniques that allow to consider the possibility that the effects of an economic policy measure may not be uniform, but they can vary according to the characteristics of the different provinces in terms of economic development.
The research has been supported by the Ministry of Economy and Finance, the Universitat Jaume I, The Valencian Government through the PROMETEO programme, and FUNCAS (Fundación de las Cajas de Ahorros).
Pastor, J.M., Pavia, J.M., Tortosa-Ausina, E., Serrano L. (2016): “Rich regions, poor regions and bank branch deregulation”, Regional Studies, pp. 1-17.