SPANISH CAJAS

Normally when a member of staff at The Hanley stops me at the coffee machine to chat about Spain,the conversation focuses on their holidays to the Spanish coast or my annual golf trip to Marbella, but this morning I was quizzed about the plight of the Spanis Cajas. These small local banks are tipped by some market commentators to struggle to pass the current round of "stress-tests" being undertaken for banks across Europe and my colleague wanted to know whether there were any crossover similarities with small UK building societies. Of course some common ground does exist in that cajas and local building societies, like The Hanley, are locally based and are not quoted companies but that's really where the similarity ends.
Cajas are not mutual, customers are not members,and do not own the business. Cajas are heavily influenced by local political control and their lending is heavily influenced by that control.
Cajas are also exposed to the new-build development market in Spain where planning rules and the funding crisis left many sites empty and worth far less than was lent on them at the market peak.
It will be interesting to see the results of the stress-tests on the banks across Europe and indeed to look at the perceived strengths and vulnerabilities of all banks not just the cajas in Spain. But mutuality and resilience remain distinctive features of the UK building society model and if the past 2 years have taught us anything at all it must surely be that large organisational scale is no guarantee of success.