THE BANK MANAGER

Walking down the calle mayor (high street) of any Spanish town the names of many banks will be prominent. Caja Madrid, Caja Murcia, Banco de Santander, Banco Bilbao Vizcaya Argentaria (BBVA) are a few examples which demonstrate the ability of each city to spawn its own bank. Incidentally the word caja means bank or till.

Banking in Spain is fragmented. There are about 150 different banks serving different markets and with different functions. Clearing banks, savings banks, lending banks, cooperative banks and some foreign banks of French, German or British parentage compete on an equal footing. These banks have many, many branches but care is required as naturally some of the smaller outlets do not offer a full range of services.

But banking is changing. Frequent takeovers or amalgamations occur as these organisations seek national coverage for their products changing strategy from their historic regional roots.

What bank?

A bank may be recommended by the agent, the abogado or be linked with a bank back home. It is unlikely to be of Irish or British parentage since they are few in number. German banks have a strong presence. Here are some recommended criteria for selecting a bank:

• Some staff, preferably the manager, should speak English.
• The branch should be relatively close to the new property.
• In order to have access to major services such as mortgages and investments, the bank should be a major player in the Spanish marketplace.
• Money transferred into Spain for the purchase of a property will come through the clearing bank system. The home bank and the Spanish bank should both be main branches to prevent delays in money transfer.

Make no mistake, while Spanish banking has some complicated procedures, it is reasonably efficient, usually staffed by friendly, hard working, multi-lingual people capable of offering the customer some of the most up to date services including telephone, TV interactive and internet banking.

Credit or debit plastic cards are accepted for the purchase of consumer goods but sometimes only with some other form of identification containing a photograph, such as a passport or ID card. The principal use of plastic cards is to obtain cash, at a small charge, from an ATM (hole in the wall cash dispenser) of which there are many.

Strategic and offshore banking

The use of two accounts, one in your home country and one in Spain, should be enough for most needs. The transfer of money between the two is straightforward particularly if in Euros. For transfers between sterling and Euro the use of an intermediate link to reduce fixed transfer charges, buying Euros at spot price or on a forward contract, is cost effective.

Offshore banking has some advantages for investments and tax free savings. The EU is trying to close such loopholes. Since Gibraltar is so close to the Costa del Sol it is still possible to bank offshore. Many offshore current accounts offer a cash or credit withdrawal world wide. However, a charge of 2.25 per cent for exchange rates and 1.5 per cent per withdrawal makes confidential offshore banking expensive.

Non residents’ certificate

There are no financial exchange controls in Spain. The Euro is the dominant currency. A property is best paid for by a banker’s order in Euros but sensible alternative methods are permissible. The key principle of this financial transaction is to have it documented within Spain through the buyer’s bank.

The financial transaction can be completed outside Spain. For example the money can be transferred from the buyer’s account in Edinburgh to the seller’s account in Dublin. But to do this a ‘Certificate of Non-Residence’ is required. It is issued in Spain by the Ministry of Interior and helps the Spanish tax man keep track of where the money comes from and goes to. This will take time; without it the notary will not approve the purchase.

The Euro

Euro coins and notes have been circulating in EU member countries from January 2002. The much loved Peseta has now gone, held only in fond memories. At its launch the Euro instantly devalued and since then has been a consistently weak performer against Europe’s other major currency, Sterling, and equally against the mighty Dollar, which currency is weak or strong is a matter of speculation. Currency fluctuations emphasise the risk when buying a new property abroad where the time beween agreeing a purchase and completing can be up to 18 months. A contract to buy Euros forward is one of the solutions to this issue.

The relationship between the Pound and the Euro is still floating. In the first few years it has fluctuated by 15%. In the case of the Dollar the variation has been slightly greater. The following formulae, although not strictly accurate, is a good guide for everyday purposes.

6 Euros = 4 British Pounds = 1000 old pesetas

Mortgage facilities

Need a mortgage? The Spanish bank is a provider. Need a short term bridging loan? Forget it. These two statements demonstrate a difference in attitude towards borrowing money. A loan is for business, a mortgage for home finance with the two kept strictly separate. There are no building societies or their equivalent in Spain with the exception of a few based in Gibraltar. Banks therefore have a captive market for the provision of home finance. The criteria for a mortgage are quite familiar:

• The earnings of one or both purchasers are taken into account.
• The property is valued, not at market value, but at a rebuild cost per square metre.
• The maximum mortgage for a non-resident is around 60 per cent of the valuation. The maximum for a resident around 80 per cent.
• A combination of a low valuation based on rebuilding cost and not market value, and a low mortgage based on that valuation, means the actual mortgage can be as low as 40 per cent of the market price of the property.
• Mortgages are easily concluded but banks take very little risk in granting them.