?QUE? LEND MONEY TO A RIVAL BANK?
Spain's accession to the EEC at the begining of the year has brought the country's financial institutions into a world of unrestricted competition.
"A year ago the capital market was a desert. Now, with some help from the foreign banks, the Spanish banks are familiar with most of the wonderful formulae of the Euromarkets," said a Spanish bank analyst in Madrid. "Although the bond market hasn't seen quite the same surge of innovation as the syndicated loan market, the developments over the last year have been impressive."
Spanish entrepreneurs have not always thought their bankers capable of providing them with cheap, competitive funds. One alternative, commercial paper, is already commonplace in Spain. The first issue was organized by Midland Bank in 1982 for ENHER, a public utility. The market grew in volume from Ptas50 billion (then worth $450 million) in its first year to over Pts 600 billion ($3.9 billion) in 1984. It slumped last year, when the government imposed a withholding tax of 18%. "The primary market died almost immediately," said Chris Ashby, general manager of Chemical Bank in Madrid. But it revived at the beginning of this year.