In defence of Spanish cooperative savings banks

Would you have a few years ago believed that Caixa Popular could become a leader in the sector?

It was unthinkable. But all the big monsters like Bancaixa, CAM, Banco de Valencia or Ruralcaja have completely crumbled, so strong regional economies like Valencia’s have lost financial power and the ability to make decisions. The savings banks that have survived have now plenty room to expand, and that’s crucial.

Why are you still standing?

We have a mission, and stick to it. We advocate an alternative financial model, based on co-operation and partnership, and associated labour. Our clients are aware of the difference and, moreover, it has proved successful in this crisis environment. Our balance sheet has always been sound. The only other savings bank similar to ours would be the Caja Laboral or Mondragon Group.

And the difference is being proprietors, not just wage-earners…

That is correct. The partnership model is one where you put your work, and your projects, your future, into. We protect our jobs by being independent and making our own plans. Some mergers into larger umbrellas have failed to secure the efficient functioning of their entities, and also to enforce common sense. Some of the Ibex stock market index-listed entities have a gap between lowest and highest salaries of one to 1,000; ours is one to three. Our principles are crystal clear, and work.

You enforce a salary cap.

We distribute profits. When Caixa Popular makes money, everyone shares in. We don’t have so-called golden parachutes contracts, we don’t have finger-appointed jobs, we don’t have secrecy strategies: our model is competitive, perhaps limited but sustainable in the long term.

Yet, you face the same criticism as larger listed banks: you aren’t lending enough to companies and households.

Brussels pushes in contradictory directions. We are asked to lend, and we are forced to increase reserves. To do both at the same time, we’d need more flexibility. Households and companies have serious problems and the deficit targets imposed by Europe penalise refinancing operations at the end of the day.

Many see banks going for the easy option of getting credit from the European Central Bank at low rates and lending at 4 percentage points higher rates. Nice way of making money…

First, you need quality collateral or guarantees, and the ECB isn’t an open bar where you access a bottomless pile of cash, those loans must be repaid in full in 2015. The main problem is that much of the credit demand we receive nowadays would be used to repay other debts, and the hole just gets deeper and deeper. We need to protect ourselves.

Did you see the current crisis coming and hitting Spain’s banking sector the way it has?

I cannot understand how some banks could go on with certain management practices that were obviously wrong, I cannot understand how they were allowed to go on. Board members had no clue, corrupt politicians meddled in… that was what killed our savings banks. Of course, the housing bubble disrupt the whole economy, diverting resources from other sectors towards construction in a very irresponsible manner. But it is true that neither the Bank of Spain or Brussels, or the International Monetary Fund, issued a proper warning. Their criteria to watch the economic cycle failed.

Are we now heading to a banking oligopoly in Spain?

It would be wrong of domestic competition, I hope the monetary authorities bear that in mind. How many urban centres and small villages will lose direct access to the finance system? I disagree with the current concentration and merger frenzy. The recent past tells us that the problems rose within the larger entities, not the smaller, the toxic bomb was Bancaixa, not Caixa Popular.

About the Author

The Corner
The Corner has a team of on-the-ground reporters in capital cities ranging from New York to Beijing. Their stories are edited by the teams at the Spanish magazine Consejeros (for members of companies’ boards of directors) and at the stock market news site Consenso Del Mercado (market consensus). They have worked in economics and communication for over 25 years.

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