A Spanish Banking Crisis in the Making

Spain was hit hard by the financial crisis. Like the U.S. and the UK, Spain experienced high capital inflows and rapidly rising housing prices in the years leading up to the crisis. And like the U.S. and the UK it is now stuck with a struggling banking sector and bloated public finances. Spanish banks have…

Spain was hit hard by the financial crisis. Like the U.S. and the UK, Spain experienced high capital inflows and rapidly rising housing prices in the years leading up to the crisis. And like the U.S. and the UK it is now stuck with a struggling banking sector and bloated public finances.

Spanish banks have found it increasingly hard to get funding in international capital markets, thus turning to the European Central Bank (ECB) to meet their short-term needs for liquidity. Spanish banks borrowed around €85 billion from the ECB last month, which, according to the Financial Times, “provides further evidence of the acute tensions in the Spanish banking system.”