Safeguards for a success story

Spain's cajas have been around for nearly 170 years but it wasn't until 1977 that they were allowed to compete on an even footing with commercial banks. In the past 25 years they have been steadily gaining market share, while at the same time their presence in the market has prevented the country's financial system from becoming a monopoly under the two big banks, SCH and BBVA, that dominate the financial services market.

The new law represents a major step forward in making the cajas more market oriented and competitive. One of the most significant initiatives is to limit the presence of public officials on the boards of the cajas. The last law that was introduced on the cajas in 1985 made it possible for political representatives to sit on the boards, but in many cases they accounted for 50% or...