Introduction

Spain's financial institutions have been subject to considerable modification as a result of the process of harmonisation with the European Union and with the development of the Single Market in particular. Banking and other financial institutions were brought into line with those of other EU countries by the 1994 Law on the Adaptation of Spain's Financial Institutions to the Second Directive on Banking (Ley por la que se adapta la Legislatión Española en materia de Entidades de Crédito a la Segunda Directiva de Coordinatión Bancaria).

Spain's traditionally rigid financial system had already begun to experience a much needed overhaul prior to EU membership in the late 1970s. The 1978 legislation permitting the establishment of foreign banks in Spain for the first time since the Spanish Civil War helped to introduce new financial instruments and techniques as well as new institutions. Reforms also saw the beginning of the gradual phasing out of the obligatory investment ratios for financial institutions in specific areas of the economy and for privileged clients in both the public and private sectors. The 1978 report of the Comisión para el Estudio del Merc ado de Valores heralded a series of technical reforms in the securities markets which have come to fruition in the 1990s and which have helped to produce a more open system which is more capable of generating the resources needed to sustain economic growth.