During the first phase of the global financial crisis, the Spanish financial system weathered it relatively unscathed.. When the crisis intensified, however, it exposed the weakness in the policy and regulatory frameworks. The country was over reliant on wholesale funding, specifically for mortgages and construction, and the financial system was unable to escape its dramatic effects.
This crisis was not an isolated incident, however, Spain has a long history of them.
This research project seeks to explain why the Spanish banking system has been historically unstable. It will discuss why the banking system has not only been crisis prone, but it has a troubling record of providing relatively small amounts of credit to business enterprises.