The effect of bank restructuring on the issuance of preferred shares in Spain

Abstract

Since 2007, when the real estate bubble burst, we was immersed in a global economic crisis. During this period, the Spanish financial system has experienced a process of economic imbalance and downturn as a consequence of massive exposure to the construction sector. In this context, the banking institutions, aware of the need to recapitalize their balance sheets, offered their retail clients a complex and high-risk product: preferred shares. What at first was considered the ideal solution for recapitalizing the institutions has done nothing but worsen the economic situation, highlighting the vulnerability of the banking Spanish system. All of this gave rise to a process of bank restructuring that was unprecedented in Spain. The result has been the reduction of the number of banking institutions from 45 in 2009 to 12 today, with the consequent repercussions on the macroeconomic variables and the economies of families and businesses.