ABSTRACT
The literature on regulation suggests two alternative reasons for the Spanish banking legislation in the period 1940-1975. The first suggests that regulation offsets market failures. The second, that regulation is a means of using state power to further an industry’s own interests. Conventional wisdom emphasises the importance of the links between banks and government, which are seen as evidence of the capture of the Franco government by the banking sector. The Franco government has been seen as a passive actor that regulated in response to pressures from society, especially industrial and banking pressures (Brana, Buesa and Molero 1984 or Lukauskas 1992). Although this view is widespread, it ignores the fact that the regime itself had a programme of industrialisation and it needed the collaboration of the banking sector to achieve its goals. As explained in Chapter 4, the interest of the banking sector in minimising risk and maximis ing profits and the objective of accelerated industrialisation of the Franco government, both had a strong influence on Spanish financial legislation under the Franco regime. Nevertheless, this latter intention of the Franco government to use financial regulation as an instrument to develop its economic programme was the most prominent.
