Spanish savings banks in the credit crunch: could distress have been predicted before the crisis? A multivariate statistical analysis

Abstract

Spanish savings banks (Cajas de Ahorro) have had a long and distinguished history over more than 100 years of existence. They have served well the community and small businesses. However, they have been heavily affected by the 2007 banking crisis and they are on the verge of disappearing. Some of them had to merge with other institutions or had to be rescued, while others became banks. We show that there was statistical evidence to identify, before the crisis, structural differences between successful Cajas and those that had to be rescued. The technical approach is based on multidimensional scaling (MDS) analysis. MDS has the advantage that the main characteristics of the study can be presented in a visual form, and thus facilitate communication of the results with regulators, politicians, and the community at large. We complete the study with the time path of four institutions: two that survived and two that had to be rescued.

Keywords:

• bankruptcy
• corporate governance
• financial crisis
• multidimensional scaling
• savings banks

JEL Classification::

• G21
• G33
• G34

Acknowledgements

The authors thank Vicente Salas, Xavier Segura, the editor, and two anonymous referees for their helpful comments in earlier drafts. The authors also acknowledge support from the Project ECO2010-21393-C04-01 financed by the Spanish Ministry of Science and Innovation. An earlier version of this article was published as FUNCAS Working Paper No. 667/2011.