Research Report: Economic Recession Impacts on Private Banking Sector

This business research report analyzes the potential impacts of the economic recession on private banking, focusing on the Spanish economy and the challenges faced by private banks like Bankinter. The report examines the policies and strategies that banks can adopt to minimize the risks associated with economic downturns, particularly in light of the 2008 financial crisis and its aftermath. It reviews relevant literature on the Spanish economy, including factors contributing to its decline and government policies implemented to stimulate demand and investment. The report also touches on the impact of unemployment, inflation, and fiscal policies on the banking sector, highlighting the need for effective resource allocation and strategic management by private banks during periods of economic recession. Desklib offers a variety of resources, including past papers and solved assignments, to aid students in their academic pursuits.

Running head: BUSINESS RESEARCH REPORT: Analysing the potential impacts of the economic
recession from private banking perspective
BUSINESS RESEARCH REPORT: Analysing the potential impacts of the economic recession from
private banking perspective
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BUSINESS RESEARCH REPORT: Analysing the potential impacts of the economic recession from
private banking perspective
Table of Contents
Section 1: Introduction..........................................................................................................................2
Section 2: Literature Review..................................................................................................................3
Section 3: Methodology........................................................................................................................6
Section 4: Discussion and evaluation.....................................................................................................7
Section 5: Conclusion and recommendation.......................................................................................12
Reference list.......................................................................................................................................14
Appendix.............................................................................................................................................18

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BUSINESS RESEARCH REPORT: Analysing the potential impacts of the economic recession from
private banking perspective
Section 1: Introduction
Economy of Spain and other developed nations in modern days are facing harsh face of
recessions and the prolonged growth of the recession is having deep impact on the economic
performances of these countries. The setting of the project will definitely highlight the indulgent of
the financial problems that the Bankinter bank is facing in Spain. This is important in the sense that
currently financial problems have been uprising within the country. On the other hand, the
development of a better financial environment will be helpful for the development of investments.
The main objectives of the study are to highlight the policies and strategies that most of the
government will have to take so that Bankinter bank can minimise the risks of financial problems.
The main aim of this project is to highlight the potential impact of the economic recessions on the
performances of economies like Spain and how the private banks like Bankinter is taking policies in
order to minimise the effects of recession. In country like Spain, the effects of harsh and prolonged
recession is basically increasing the unemployment rate and lack of investments in the housing
industry. The main financial crisis that the Spanish economy is facing is in the form of deregulation
of real estate mortgages in US. In 2007, the sub-prime loan emerged and it started to create the
financial problems by high margin.
The rising price of oil and food price made the financial crisis worse than before. On the
other hand, a rumour was heard regarding interbank loan and loan losses were building up and the
global financial company Lehman brothers collapsed. The main purpose of choosing this study is
mainly because of the fact that financial market of Spain is vast in nature. Through the development
of better policies, it is important to estimate the overall potentiality of the country in managing the
financial perspectives that will improve the performance of the overall economy. Millions of houses
in Spain are remaining unsold as the banks are not getting enough cash to provide the mortgage fees
to the brokers. During mid-1990, the Spain even allowed a number of temporary contracts in order
to reduce the unemployment in the economy. In order to do so the consequences was not up to that
mark as after this initiative huge amount of unemployment in the economy has increased.
The reasons for choosing the topic is that it will highlight the indulgence of the various
policies that will not only increase the development of financial conditions but will also increase the
resource utilisation that in turn will benefit the spread of business in the Spanish economy. Through
the development of the financial conditions of Spain, more amounts of investments will come into
the economy.

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BUSINESS RESEARCH REPORT: Analysing the potential impacts of the economic recession from
private banking perspective
Research Aim
The main aim of this project is to identify the impact of recession that is falling on the
financial performances of private banks and companies like Bank Inter is facing stiff challenges in
continuing their operation. The aim of the study is to identify the main factors that are going to
increase the operation of private banks and the policies they are going to take in order to tackle the
impact of recession. However, the study will mainly aim to resolve the problems that are going to be
faced by the company regarding the financial issues. Moreover, the study is aiming to solve the
issues that are faced by Spanish economy as characterised by prolonged session of economic
recession and most of the business collapsed.
Research objectives
 To identify the impact of recession that is falling on the performances of Bank inter
Company and the areas that the banks they should take during recession.
 It is important for the company to increase the level of policies that is actually helping the
economic and financial activities that are beneficial for counterattacking policies of Spanish
economy.
Section 2: Literature Review
In the modern business world, the development of banking systems and other financial
institutions, it is important to implement better technologies of banking. According to López-Sala
(2017), the Spanish economy started to grow at high pace. From mid-1990’s, the growth was
withstanding a steady growth and it continued almost for a decade. Incorporation of the Spanish
goods was coming into Spanish economy. Development of goods based on the ethnic, national and
religious diversity. The Spanish government has focussed heavily on the construction of the
hospitality industry, tourism, services, intensive agriculture and transportation. However, the
economy did not focused on the development of the banking sectors. In the past few decades the
immigration in the Spanish economy has increased by huge margin. Due to more complex situation
in the immigration policy, the development of the banking sectors is more important so that the
development of the future perspectives can be achieved. On the other hand, it has been seen that
Spanish economy was characterised by tolerated irregularities.
As opined by Salmon (2017), the Spanish economy witnessed the highest economic growth.
In the effect of the great recession, most of the business in the Spanish economy collapsed and the
development of the business was facing issues in the form of deregulations and bank collapse.
Responding to the situations of Spain, it is important for most of the economists about the

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BUSINESS RESEARCH REPORT: Analysing the potential impacts of the economic recession from
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development of the business and they have highlighted three main factors behind the decline of
Spanish economy. On the other hand, the development of Trichet’s claim in the short run was full of
negative externalities. The claim was mainly responsible for the development of unemployment and
high price rise in the economy. Secondly, all the countries that were present in the European Union’s
started to feel the pressure of contracted business that has given rise to the development of the
business (Agnese and Hromcová, 2018). Most of the business was facing collapse and the internal
demand was increasing due to the paradox of thrift. On the other hand, the macroeconomic
conditions were depleting because of great depression. Along with this, most of the government
policies were aimed at cutting out the public spending thinking that it will boost up the consumer
demand. Both public and government misjudged the economic situations and forecasted that future
spending will increase and they started to spend less in the current period. People were fearing of
losing their jobs rather than behaving in a rational way (Aiyar et al. 2016). Through the development
of current spending, the consumers are not willing to determine the food baskets according to their
price prevailing in the economy. Rather they thought of minimising the tax burden and they thought
of minimising the trade gaps. This has created certain problems for the company like Bankinter as
they were facing huge problems in collecting the revenues. Through the development of low
profitability, the company was facing problems in the investment opportunities.
The development of the policies in order to mitigate the global economic crisis that the
Spanish economy was facing was quite similar to the policies that were mainly designed during the
period of 2008-2009. Government spending was about 35% of the National GDP and the three years
surplus was followed. In spite of such efficiencies, the public spending that was part of the GDP was
quite low in nature compared to other European countries. In the stability plan of 2007-10, the GDP
was forecasted at 3.1% in 2008, 3% in 2009 and 3.2%% in 2010. On the other hand, the general
budget of the state for 2008 was forecasted to be around 3.3% (Álvarez-Díaz et al. 2015). The
economy of the Spain was focusing on the development of investment along with the development
of GDP. In order to bring the attention of the investors, the government took many stimulus
packages that were mainly designed to underpin demand and the monetary policy was aimed to
compliment the development of the business. On the other hand, the development of the business
will definitely increase the investment opportunities that will not only increase the investment
opportunities but will also ignite the government to indulge deeply the fiscal policies. On the other
hand, the total valuation of the fiscal policy taken by the government was around €18 billion for the
two years. It included a refund of €400 in 2008, and 2009 estimated the treasury cost of €6billion
(Andreeva and Sviridov, 2017). The development of the resource utilisation will not only highlight

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BUSINESS RESEARCH REPORT: Analysing the potential impacts of the economic recession from
private banking perspective
the involvement of the business stakeholders and the government policies but will also define the
roles played by private banks in minimising effects of recession.
Antelo (2017) opined that in the Spanish economy, the unemployment and the inflation rate
was increasing by huge margin. Through the development of the unemployment and inflation rates,
the house price was increasing and the development of the government policies will be looking
forward to increase the better investment facilities. The private banks are facing the problems
mostly during the period of recession as they has to depend entirely on the central banks for any
kind of repo rates and discount rates. They also have to depend entirely on the central banks,
regarding the loanable conditions that will be highlighting the development of better strategy of
operations. Most of the private banks do not have huge amount of accessibility to the development
of the business but they are bound to get the penalty for any kind of misjudgements that are done
towards the customers. From the point of view of better strategy management of the economy, the
private banks are not being able to work efficiently in Spain.
According to De Cosand Moral-Benito (2016), the fiscal policies that are taken by most of the
companies to indulge the functional ability of the banking institutions. Through the development of
fiscal policies most of the government contracts the goods manufacturing and they tend to minimise
the burden of the tax. But most of the modern economists have claimed that increasing goods
manufacturing will automatically help the economy in improving the situations of the economy. Due
to inheritance of cultures and heritage of the Spain economy, the government is trying to minimise
the gaps in the investments. During the period of the recession, the development of the business is
problematic in the sense that most of the companies will be laying off the employees as the cost of
operation increases for the economy. It is important for the countries in the developed nations, to
increase the trade and commerce that will be helping in the development of the business in the end.
Through the development of the trade and commerce, it is important for the companies like
Bankinter to increase their resource allocations. Most of the private banks tend to remove the
development criteria that are initially acts as the benefit for the customers.
Bentolila et al. (2017) opined that due to dryness of the capital in the economy of the
developed nations has taken the initiave of mostly by the government. Most of the policies have
seen that the development of the business in the private banking sectors that will be facing more
problems in the sense that drying of the cash will be helpful for the development of better strategies
in the form of better marketing of the goods. Economic recession is the event that occurs for the
short time. Its consequences include high unemployment, reduction in the economic activity and
reduction in the income that have a long lasting effect. The interest rates in the economic recession

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BUSINESS RESEARCH REPORT: Analysing the potential impacts of the economic recession from
private banking perspective
generally go down. However, in short run, the falling rate can assist the net interest margin of bank
and the loans have fixed rates as compared to the deposits accounts that quickly reprices. Due to
higher unemployment created by recession, the problems of the lenders includes Loss in loan and
delinquencies increases which occurs because the primary sources of the income decreases and
decrease in the spending of the consumer and loan related to that. In the recession, Due to less
demand, bank also faces problems in the growing the portfolios of loan, the portfolio of legacy will
contain more problem loan which impact the service expenses of bank, loss on loan expenses and
values of the assets which is loan servicing which ultimately through its income statement have to be
written down.

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BUSINESS RESEARCH REPORT: Analysing the potential impacts of the economic recession from
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Section 3: Methodology
Introduction
For the purpose of the development of the business, it is important to introduce
methodologies of different types. However, for the purpose of this study, both the primary and
secondary data collection process has been chosen. This is because of the fact that through the
incorporation of both of these processes, it is important to bring in innovations in the theories that
are being used. Through the implementation of deductive method of data collection, it will be
important for the company like Bankinter to increase the overall efficiency regarding the mitigation
of the financial investments. Inductive method of data collection will be focussing more on the
process of development of new theories. However, on the other hand, the deductive method is
going to implement new idea regarding the development of the financial market of Spain. In order to
increase the effectiveness of the project, the simple random sample without replacement is chosen.
This is important in the sense that through the incorporation of simple random sampling methods,
the sample that is chosen will not be given back to the population level. This is done mainly to
remove the biasedness from the data.
Research design
In order to carry out the project it is important to identify the consequences of such weak
financial situations that the Bankinter Company in Spain is facing. In order to identify the
consequences of the project better design of the methodology will be chosen. It is important to
highlight the development of better financial condition; it is important to highlight the development
of the factors that will be effecting in the policy formation of better financial conditions that most of
the private banks of Spain are facing. In order to carry out the success of the projects, both the
quantitative and qualitative methods of data collection has been done. This will be done because of
the fact that through the quantitative method of data collection, it is possible to underline the views
of the employees working in the Bankinter Company regarding the development of financial
situations. Through their views, it will be helpful for the study to highlight the policies that their
companies are taking in order to fight the consequences of economic recession. Moreover, the
sample size of employees that are chosen for this purpose is about 30.
Research methodology
Moreover, the quantitative methods of data collection are also important in the sense that it
will highlight the views of the managers regarding the effects of the recession on the Spanish

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BUSINESS RESEARCH REPORT: Analysing the potential impacts of the economic recession from
private banking perspective
financial sectors. For the purpose of the quantitative survey, about 3 managers of the company has
been chosen. This is important in the sense that it will be highlighting the development of the
banking business in Spain and how the company is reacting to the economic recessions will be
identified. On the other hand, through the development of better innovations it will be possible for
the company to tackle economic recessions. This particular approach that has been taken in order
to minimise the biasness of the data that will improve the success rate of policies. This is because of
the fact that for such kind of jobs, it is important to remove the biases of the data that are mainly
associated with the primary methods of data collection. Through the development of secondary
methods of data collection, it is important for the study to identify various kinds of financial data
that are mainly linked with the recession for any financial institutions. With those data, it is
important for the study to identify the policies. The use of inductive and deductive method of data
collection will allow the indulgence of study to increase the better development of the approach will
define the study the indulgence of the banking perspective of Spanish economy.
Research Onion
Figure 1: Research Onion
(Source: Saunders et al)
Research Philosophy
On the other hand, the deductive method of data collection is improving the effectiveness of
the data collection technologies that will be minimising various problems that lies within the data
collection methods. However, using both survey and interview will definitely increase the
effectiveness of the study using the data from the employees and as well as the managers will be
able to identify the pros and cons of the economic recessions. This method of data collection will
increase the development of the business. In Spain, due to the collapse of the largest group Lehman
Brothers has created fear in the mind of the people. Managers has been selected in the sense that
so that they can identify the gaps in the policies that are prevailing in the economy. Through the

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BUSINESS RESEARCH REPORT: Analysing the potential impacts of the economic recession from
private banking perspective
implementation of the better methodology, this study will be inducing better technologies that will
increase the mitigation technologies for inflation that is prevailing within the economy. Economic
recessions will bring in more amount inflations that will automatically put pressures on the
company. This is important in the sense that Bankinter Company will be looking forward to bring the
effectiveness of their policies that will help them in the long run. On the other hand, the
development of the inequality is going to have deep problem for the economy. Through the
development of the efficient allocation, the company will be dealing in better innovations that will
minimise the corruptions and other aspects of the Spanish economy.

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BUSINESS RESEARCH REPORT: Analysing the potential impacts of the economic recession from
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Section 4: Discussion and evaluation
Morgan (2009) opined that there are there are many theories that are mainly highlighting
the conflicts among various decisions taken by the FED banks. Even the ECB has persuaded the
development of the monetarism theory that will mainly determine the development of financial
constraints. All the banks are having short run interest rates that will induce the development of the
financial business. For example, the Bank of England is having 2% inflation rate as set by chancellor
and the maximum relaxation that the country has allowed to is that 1% on the consumer price index.
It is important in the sense that through the development of the price inflation, it is important for all
the private banks to identify the development of the financial business. In order to put the GDP to
the trend line, the interest rate r actually plays one of the crucial roles. During the collapse of global
economic crisis in 2009, most of the developed countries faced one of the biggest problem that
came mostly from the decisions that were taken by the federal government. During that point of
time, most of the decisions that were taken by the central bank failed because of the
misunderstanding of the concepts of the modernisations. Due to excessive use of Taylor framework
of monetarism, it has been seen that mostly short term interest rates are mostly responsible for the
development of low and stable growth of inflation but in the long run, these were the main
constitution for slow growth of the economy. Most of the theories at that time believed that actors
within the system will be forcing the system to return to the equilibrium level. On the other hand,
this theory was strongly criticised by Keynesian theory. The Keynesian theory claims that it is the
push from outside the system will be able to bring the system into equilibrium and in order to
increase the efficiency of the system the government investment is important in the sense that it will
definitely ignite the system.
Berger et al. (2016) opined that banking sectors in most of the developed nations has faced
discrepancy in the decisions. However, the modern banking system was initiated by Germany and it
consisted of three main sectors, private sectors, public sectors and co-operative sectors that actually
differs in operation and organisational sectors. However, it has been seen that the co-operative
sectors are the sectors that are facing the consequences of the economic recession. The
development of three sectors has given rise to the development of better level of observation. This
is important in the sense that due to lack of effective monitoring from the government level then
many developed nations have faced incidents like bank collapse and many more. Not only this, the
development of better innovations will automatically increase the development of the better
investment opportunity that will improve the performance of the banking sectors. During the period

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BUSINESS RESEARCH REPORT: Analysing the potential impacts of the economic recession from
private banking perspective
of recession, most of the banking institutions are facing the problem of unemployment and they will
face issues in the rolling out of money.
Qualitative analysis
When the managers have asked whether Bankinter can minimise the consequences of
economic recession, they have claimed that most of the managers of the Company will be aiming to
increase the minimisation of the corruption level. During the period of 1868, the Spanish GDP fell by
more than 10% and most of the banks were bankrupted between the periods of 1865-1870
(Ecb.europa.eu, 2019). Most of the projects that were initiated by the European Unions were mainly
financed by the banks that were having bankruptcy. Under these circumstances the performances of
Bank of Spain is notable because they have contracted all the money, deposits and banknotes. It has
been done to increase the liquidity ratio that will help them as there was negative correlation
between the liquidity of the bank and the share of public debt over its portfolio in the period
considered. Negative correlation between the liquidity of the bank and the share of public debt over
its portfolio in the period considered. Due to over indulgence of the bank in the government
activities forced them to take such action. The main agenda of the bank was to provide the funds to
the government sectors ignoring the private sectors. The Joint Stock Companies Act of 1856 and
Company Act of 1862 in the UK and the Ley General de Sociedades de Crédito in Spain has laid the
formation of new type of banking that has taken the initiative to increase the development of the
liquidity rate and through this, the Spanish economy has survived the economic recession.
While responding to the question of minimising the consequences of the economic
recessions, one of the major reason for the development of economic recessions is the low level of
profits that has been getting generated from two of major railway projects Sevilla-Jerez-Cadiz and
Merida-Sevilla. About 80% of the investments were from the railway and when the crisis came, the
banks were deleverage and the bank failed to meet the demands of the investors and the banks
were forced to declare bankruptcy. In Spain, most of the economic scenario is not allowing the
development of better monitoring of the pros and cons that are mainly associated with the financial
performances. Moreover, the managers has claimed that due to the loss of profits in the Spanish
economy, the private banks has been forced to declare bankruptcy. On the other hand, it is
important for the government to increase the monitoring of the profitability of the projects that are
being initiated in the economy. The managers has claimed that in order to minimise the
consequences of the economic recessions it is important for all the financial institutions to work
jointly so that they will be able to increase the development of the business that will effectively
increase the development of the resource utilisation.