Public Administration as Stakeholders in Spanish Savings Banks

The corporate governance mechanism operates in a different way in credit institutions (banks) than it does in non-financial enterprises. The agency problem inherent in the relationship between shareholders and bank management is influenced by the moral hazard affecting the managers, which is even more marked by the deposit insurance schemes. In addition, money deposit institutions (in the terminology of Banco de Espana) are subjected to many regulations that affect their efficiency in the allocation of resources to the real system and their ability to implement the monetary policy of the central bank. In spite of the continuous and general deregulation of financial services in many developed countries, policy-makers have kept their role as effective monitors of deposit banks. Policy-makers decide the optimal way to organize the banking system through regulations to make sure that banks are managed efficiently — examples are those regulations fixing the timing and form of banks’ statements and assessing risk positions and provisions. Regulation is an effective safeguard of the shareholders’ and depositors’ interests, as well as of those of the financial system. However, regulation can produce an inefficient allocation of resources when regulators can benefit from them.