Banks

Spain's largest bank, Banco Santander, has arrived at the higher reaches of the European banking league while working under a strict regulatory regime which could offer some lessons for Britain's beleaguered banking sector.
For many years Santander has been a conservative, stolid operator suffocated by Spain's central bank. But the imposition of those rules has helped the bank avoid the worst of the credit crunch and left it as the fourth biggest mortgage lender in Britain.
Based in the Cantabria region in the north of Spain, it grew from humble regional beginnings largely through trade routes and historic ties to Latin America, where it has built up a substantial business. By some estimates it has 10% of the Latin American market and many of the region's richest people as customers.
In the early 1990s it avoided a banking crisis that forced Spain's central bank to rescue mortgage lender Banesto. Santander bought Banesto at a knock-down price and became a major institution.
After the dust settled, the government forced banks to keep a higher ratio of capital aside to cover bad debts. In the UK, banks typically make provisions to cover 80-100% of their bad debts. In Spain, banks must cover 150% of bad debts.
The Spanish government also prevented banks from disguising the level of their liabilities that are housed in off-balance sheet vehicles. By contrast, UK banks sold and run mountains of mortgages off-balance sheet, and to avoid tax, usually offshore.
Spanish mortgages are also rarely sold to cover 100% of a property's value. In the main, homebuyers must find a 20% to 30% deposit. Discounted teaser mortgages, which have become the staple of the US and UK mortgage markets, are also little known in Spain.
So while Spain is suffering a steep property price crash and is already in recession, it is only a small number of regional banks that are experiencing mortgage troubles.
Spanish Banks have also come in for some praise from the Bank of England deputy governor Sir John Gieve - he suggested that the Uk's banks should have to put aside reserves in times of boom that they can draw down in times of bust to prevent banking crises like the current one pulling down whole economies in their wake. He pointed to a system called "dynamic provisioning" in Spain as an example of a system which works well. Spanish banks have been notably unscathed by the credit crunch and remained conservative in their lending practices during that country's recent housing market boom, meaning they are not unduly threatened now that Spanish property prices are tumbling.