ABSTRACT
Chapter 5 developed a theoretical model of banking behaviour with and without regulation. This chapter aims to test the main theoretical propositions which were derived from it. The effects of regulation on the Spanish banking system will be examined. Regulatory constraints restrict the choice of assets and liabili ties and the variables banks can choose to maximise profits. The objective of this chapter is also to estimate empirically the response of banks - in terms of profitability, concentration and other significant variables - to a specific regula tory framework. The chapter is divided into three parts. Section I analyses the effects of interest controls on the Spanish banking behaviour. In this period all interest rates were restricted by regulation and the main question is to under stand how the banking system reacted to this legislation.
