Can relationship banking survive the Spanish economic crisis?
This paper shows that the global financial and economic crisis has jeopardized the viability of relationship banking in Spain, and threatens to undercut this key element in the national structure of productive financial intermediation. The capacity of the Spanish banking system to provide relationship-banking services, which was threatened even before the crisis, is now compromised by four mutually-reinforcing forces: a tendency for credit flows to be higher in central regions and lower in peripheral ones; the shift of liquidity to central regions in financialcrisis periods; the asymmetric protection offered to the large financial intermediaries that are least proficient at (or interested in) spatially-distributed relationship banking; and the forced recapitalization of Spanish banks, which selects against small and outlying banks and requires increased minimum operating scale. These four forces constitute a quadruple ratchet effect, reinforcing the centralization of credit flows while reducing relationship-banking intermediation capacities in peripheral regions and lower-income areas.
Volume (Year): 84 (2013)
Issue (Month): 03 ()
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