Spain’s financial system has long been described as dominated by a small group of large banks, a concentration that has persisted for years. Since the 2008 crisis, the landscape has tightened even as authorities monitor, rather than treat as alarming, the levels of competitive risk using standard indicators. A striking data point last year showed that the top five banks — Santander, BBVA, CaixaBank, Sabadell, and Unicaja Banco — controlled about 69.3% of banking assets in the country, signaling a persistent, heavy concentration at the apex of the market.
According to the European Central Bank (ECB), the eurozone’s banking supervisor, CaixaBank absorbed Bankia, moving the lineup of the country’s largest institutions. Up to March 2021, Spain’s banking sector saw further consolidation with Unicaja Banco merging with Liberbank. Between 2018 and 2020, large-bank market shares slipped from 68.5% to 66.4% as competition increased in the wake of post-crisis restructuring that strengthened smaller banks. The nationalization of some entities and their integration into other groups briefly disrupted this trend, contributing to a new peak in concentration indicators.
The ECB’s data show that in 2021 the market share held by the top five banks stood at 69.3%, marking a long-run perspective that extends back to 1999. Across the European Union, Spain’s concentration levels compare with major economies, and while they remain well above some countries, they are still below others with higher consolidation. For instance, Germany, France, Italy, and the Netherlands report different patterns of market share, with a wide dispersion in concentration levels across the bloc. In contrast, some smaller or crisis-hit states exhibit much higher concentration, underscoring the varied competitive dynamics within the EU.
more amber
Following last year’s mergers, authorities’ traffic-light framework for assessing competition tightened to reflect new realities in the banking sector. The merging of Orange with a partner marked the first time since 2018 that concentration indicators rose after Popular was absorbed by Sabadell. The Herfindahl–Hirschman Index (HHI) rose from 1,082 to 1,270 over the year, signaling a shift toward higher concentration. By convention, an HHI below 1,000 is considered a low concentration, 1,000 to 1,800 is moderate, and above 1,800 signals high concentration. The European central bank and national regulators use these thresholds to gauge competitive risk in financial markets.
Competition authorities routinely rely on the HHI and related metrics to evaluate market structure. The formula squares each firm’s market share and sums the results, giving more weight to dominant players. An HHI of 10,000 would imply a pure monopoly. Regulations adopted in 2004 in the European Union set a general threshold below 2,000 as not problematic; in the United States, a market is deemed concentrated below 1,500, moderately concentrated between 1,500 and 2,500, and highly concentrated above 2,500. These benchmarks help regulators decide when to scrutinize mergers and potential anti-competitive effects.
increased concentration
Looking back to 1999, Spain’s financial sector displayed a relatively low concentration level of 427 and rose gradually over the following decade. By 2007 the level had climbed, influenced by a wave of mergers that kept it in the orange zone for several years. While a broader merger between BBVA and Sabadell would have added roughly 235 points to the HHI, market calculations suggested the increase would still sit below alarming levels. Such numbers illustrate how consolidation has shaped the sector without yet signaling a crisis in competition.
Scholarly and regulatory assessments have linked this concentration to efficiency and resilience. Since the mid-2010s, calls from the ECB and Bank of Spain emphasized the potential gains from rationalizing branch networks and workforce to lift profitability in a low-rate environment. In recent months, however, the narrative has softened amid expectations that rising price levels could support sector profitability. Still, structural challenges remain—chief among them the digitization of customer needs and potential and rising delinquency under adverse conditions. Regulators acknowledge these factors and continue to monitor developments, ready to adjust if competition trends threaten consumer welfare or financial stability.