Soledad Núñez: The Spanish banking system and the challenges it faces

Speech by Ms Soledad Núñez, Deputy Governor of the Bank of Spain, at the Club Diálogos para la Democracia, Madrid, 1 April 2025.

The views expressed in this speech are those of the speaker and not the view of the BIS.

To begin, I would first like to thank the organisers of "Diálogos para la democracia" for their invitation today. On this occasion I will focus my address on an analysis of the situation of the Spanish banking sector and the challenges it faces in an increasingly complex global setting.

Introduction

Spanish credit institutions play a very important part in our economy. They hold total assets of €4.2 trillion and make a direct contribution in terms of the value added of National Accounts of over 3%, more than in other large European economies. Spain's ten significant institutions, that is, those under the direct supervision of the Single Supervisory Mechanism (SSM) account for 14.1% of the total assets, more than would be expected given Spain's capital key.

A total of 184 deposit institutions are registered in Spain, 108 of which are Spanish banks plus 76 foreign branches. According to the structural financial indicators of the European Central Bank (ECB), the degree of concentration in the Spanish banking sector has increased significantly since 2007. Indeed, the five largest Spanish banks have gone from a market share of 40% in 2007 to around 70% in 2023. In consequence, at end-2023, Spain ranked second in terms of banking sector concentration among the main European countries, although according to various competition authorities' guidelines, this is still below the levels associated with a moderately concentrated market. By comparison, over the same period, concentration levels held relatively stable in France, Germany and the Netherlands and were significantly lower than those recorded by Spain in 2023. We must also recognise how well the banking sector has performed during the global economic shocks of recent years, from COVID-19 to the war in Ukraine and the subsequent energy crisis that caused an inflationary process that required a strong response from the ECB. Faced with these adverse scenarios, European banks, and Spanish banks in particular, have maintained good solvency, profitability, liquidity and credit quality ratios. Thanks to the extraordinary deployment of exceptional public sector measures and the soundness of the financial system, the economy outperformed the initial expectations.