Editor’s note: This article was first published in May 2012. It is a snapshot of that month, covering the Global Finance ranking, the list of systemic banks and Moody’s downgrade of 16 Spanish banks. Several banks named no longer exist as such: Banco Popular was sold to Santander in 2017 and Bankia merged into CaixaBank.
With so much uncertainty around the Spanish financial system, many people are wondering which banks are the safest in Spain in case things get worse. In a previous article we listed the safest banks in the world, based on the annual report by Global Finance. Following that same report, which gives great weight to the ratings of the agencies Moody’s, Standard & Poor’s and Fitch and looks at past profits, bank assets and risk exposure, the names that come out on top are Banco Santander, Banco Bilbao Vizcaya Argentaria (BBVA) and Banco Español de Crédito (Banesto).
These three banks are classed as systemic banks: banks whose individual failure could destabilize the financial system as a whole, which is why they are required to hold larger capital reserves than other institutions.
In 2011 the systemic category also included Bankia, Banco Popular and CaixaBank, banks that were described as safe at the time. We don’t know whether they would get the same rating today because, as we have seen, Bankia has hardly behaved like a risk-free bank.
That is why we’ll put a question mark over Banco Popular, which is drifting on the stock market, and over CaixaBank, which is now being compared with Bankia for piling up the same kind of problem assets.
As for Emilio Botín‘s bank, it is what we would commonly call a “Terminator bank”: it’s bomb-proof. In fact, it is often said that in a financial disaster, taking the worst-case scenario for Spanish banking in which some banks had to close and others merge, Banco Santander and BBVA would end up leading the banking market.
Investors, too, would currently find an excellent long-term opportunity: if they buy shares in these banking giants at today’s prices, once the storm has passed they will probably find these banks trading close to their pre-crisis levels (these are just stock market assumptions).
Even so, Moody’s has just downgraded 16 Spanish banks, including Santander, Santander UK, Banesto, BBVA, Unicaja Banco, CaixaBank, Banco Popular, Banco Sabadell and Bankinter, although this was already expected.
Featured image: Álvaro Ibáñez, CC BY 2.0, via Flickr.
