Why Spanish Banks Seem Immune to the Subprime Virus

The subprime crisis that originated in the US – with lenders giving out mortgages to many people who could not afford future payments – has begun to weaken European banks as well. Credit-rating agencies assured investors that US mortgages were a safe investment, and banks purchased securities packages that included problem loans. As prices for homes in the US market fall and homeowners struggle to repay loans, French, Swiss, German and British banks cite net losses in the billions. But Spanish banks have remained stable, largely because Spanish banks have relatively small investment banking divisions – all rigorously regulated and supervised by the Bank of Spain. The special connections that Spanish banks have established with Latin America, a region enjoying rapid economic growth, also fortify their position in global banking. Analysts who once predicted US and European banks taking over Spanish banks now anticipate a trend in the opposite direction. As one banker put it, “Some banks have gone from being hunters to being prey.” – YaleGlobal