Public Banks as an Instrument of Economic Policy: a Proposal for Spain

Abstract

At the beginning of the global financial crisis of 2008, as well as the pandemic in 2020 and in general when the market is not able to provide financing, the need for public banks to act as a primary public policy instrument became evident and, in fact, in Spain, ICO played a crucial role in 2009-2012 and 2020-2021. However, the arguments about the suitability of public banking as an instrument of economic policy beyond moments of crisis have been considered by numerous authors and go far beyond the maintenance of a subsidiary role of private banking in unfavourable economic conditions. Consequently, in this article a review of the arguments about the need to have a public bank with sufficient critical size and capacity for action has been carried out. Secondly, public banking in Spain is analysed and, finally, taking into account the above, a public banking proposal for Spain is made.