This chapter provides a comprehensive assessment of six key areas of the Spanish capital market: conditions for stock market listing and trading; SMEs’ use of market-based financing; the role of institutional investors; household savings and capital market activity; the use of corporate debt securities; and sustainable financing instruments. Each assessment area is followed by policy recommendations drawing from a wealth of data, an original OECD survey of Spanish companies and in-depth discussions with market stakeholders.
OECD Capital Market Review of Spain 2024
Capital Markets for a Vibrant and Sustainable Spanish Economy and Corporate Sector
Abstract
Capital markets play a critical role in enabling economic growth. The basic structure which allows a large and diversified investor base to freely trade claims reconciles the conflict between companies in need of long-term financing on the one hand and investors wanting the possibility to redeem their stakes at a given time on the other. This makes market-based financing, especially equity, conducive to long-term, high-risk ventures such as nascent technologies that may have significant positive impacts on productivity and economic growth, but that lack tangible collateral and visibility on the time needed to reach profitability. Capital markets also serve to promote growth by increasing economic resilience. Market-based financing tends to offer flexibility, as evidenced by the fact that companies were able to raise record amounts of both equity and bonds in the wake of the 2008 financial crisis as well as during the Covid-induced crisis in 2020 (OECD, 2021[1]). The absence of such a countercyclical source of financing can prolong recessions and debt crises, weighing significantly on long-term economic growth.
The link between capital markets and economic growth is not, however, unidirectional. Capital markets help drive economic growth, but dynamic capital markets equally need to be underpinned by solid economic fundamentals. A strong economy and well-functioning capital markets reinforce each other. Capital market development provides a venue through which savings can be mobilised and efficiently allocated to productive uses, but the extent to which they can do so depends on three core pillars. The first pillar is the adequacy of the capital market ecosystem itself: the presence of an active and sizeable investor base; corporations that are aware of and willing to receive funding from these investors; the infrastructure that connects these two actors; and the institutional framework and rules governing the flows of capital between them. The second pillar is the general economic environment: the stability of macroeconomic conditions and industry composition. The third pillar is the broad regulatory landscape: the predictability of and trust in regulation and judicial functions, which affect the ease of doing business, and their general conduciveness to corporate activity.
Only one of these three pillars is directly related to capital market policy. It should therefore be emphasised at the outset that dynamic capital markets also depend on a solid economic environment and an adequate broader regulatory landscape. Consequently, sustainable capital market development requires an all‑of‑government approach, with due attention to broader structural reforms, including administrative efficiency, youth labour market participation and broad-based upskilling (OECD, 2023[2]). Another crucial structural issue in Spain is the small size of the corporate sector, which has one of the highest proportions of employment in micro-enterprises among European peers, weighing on aggregate productivity (see Chapter 2, Figure 2.8). An OECD survey of Spanish companies run specifically for this review highlights this problem: 53% of unlisted companies indicated lack of size as an important factor in remaining private (see Chapter 3, Figure 3.16). In addition, regulatory uncertainty is commonly cited as a barrier to investment. In the EIB’s (2024[3]) annual investment survey, 73% of Spanish companies considered labour market and business regulation to be obstacles to long-term investment, the highest percentage among peer countries in both categories. This issue is also illustrated in a Bank of Spain paper analysing how size-based thresholds for reporting and other administrative obligations affect firms’ growth decisions. The findings indicate that companies often choose to remain just below the 50-employee threshold above which more onerous requirements and regulations, notably with respect to labour laws, start applying (Maza, 2024[4]). This is in line with concerns raised by stakeholders consulted by the OECD. To the extent that these aspects constrain companies from growing, they will also limit the size of the capital market, and thereby the ability of that market to support corporate growth in a vicious cycle.
A country’s capital market is in this sense as much a reflection of its economy as its driver. Figure 1.1 illustrates this. More than half of Spain’s main equity index, the IBEX 35, is composed of companies in the financial and utilities sectors (Panel A). Technology and healthcare, two key growth sectors in recent decades, together make up no more than 1.7% (of which technology is roughly a third). As a comparison, technology and healthcare companies make up 42% of the S&P 500, the main equity index in the United States (29.7% and 12.5%, respectively). The gap in returns between the indices over the past two decades very clearly reflects these differences (Panel B). While GDP growth is affected by numerous factors, the different industry structures – and therefore relative investment attractiveness – is also likely a driver of the corresponding differences in real GDP (Panel C). Similar patterns can be seen in other high-growth regions – notably in Asia, which after decades of sustained strong growth now hosts over half of the world’s listed companies (OECD, 2022[5]). Technology companies make up almost 23% of the MSCI AC Asia Index, a key equity index of the region, almost forty times more than the IBEX 35 (MSCI, 2024[6]).
Note: The indices for Spain, the United Kingdom and the United States have been classified according to the GICS (Global Industry Classification Standard) whereas the indices for France and Sweden are given according to the ICB (Industry Classification Benchmark). "Technology" in Panel A is equivalent to "Information technology" in the GICS taxonomy. “Other” includes the following sectors: basic materials/materials, consumer discretionary, consumer staples, energy, industrials, real estate and telecommunications/communication services. As of Q2-2024 or latest available. In Panel B, price returns are in USD terms, rebased to 2005; year-end values for all years except 2024 (Q2).
Source: Bloomberg, LSEG, Euronext, Nasdaq, S&P Global, OECD National Accounts Data.
Yet capital market policy remains a key area. A strong capital market ecosystem and an adequate infrastructure are imperative to realise the economic growth potential created by broader reforms. Currently, Spain is lacking in capital market intensity compared to peer countries – by many measures it is underrepresented in EU capital market activity relative to its economic weight (Figure 1.2). It is worth noting that when replicating this exercise at the global level, the EU as a whole is already underrepresented relative to its GDP.
The underrepresentation is particularly visible on the debt side, where Spanish companies have represented an average of 4.6% of total non-financial corporate bond issuance in the EU over the past decade. This is about half of what Spain’s GDP share would suggest. Equity market activity has been stronger, with both IPOs and SPOs representing slightly larger shares than GDP on average for the past decade, although with significant drops for both in 2023. However, this is not reflected in stock market capitalisation, which at 6.6% is in fact substantially lower than the Spanish GDP share (Panel A).
When looking at the sum of all capital raised in public markets (equity and bonds) relative to GDP over time, a clear decrease is visible from 2017 (Panel B). Conversely, private equity financing has become more dominant in recent years, especially since 2017 (Panel B). While investment by Spanish private equity funds is still lower than the country’s GDP share would suggest, the opposite is true when looking at the geography of the portfolio company, meaning Spanish companies receive slightly more private equity investment (including by non-Spanish investors) than expected based on GDP.
Note: No long-term time series data are available for market capitalisation. In Panel B, the ratio between Spanish and EU capital market activity is divided by the ratio between Spanish and EU GDP in each year. Public market activity is defined as corporate equity issuance (IPOs and SPOs) and corporate bond issuance, both for non-financial companies. Private equity refers to the sum of investment (venture, growth and buyout) by the country of the fund and that of the portfolio company.
Source: OECD Capital Market Series Dataset, Invest Europe, Eurostat, see Annex A for details.
Against this background, the first chapter of this report provides an assessment of six key capital market areas and formulates associated policy recommendations: conditions for stock market listing and trading; SMEs’ use of capital markets; institutional investor activity; household savings; the use of marketable debt securities; and sustainable financing instruments. These recommendations have been prepared with the broad ambition of improving the functioning of the Spanish capital market to support economic growth. The recommendations are interconnected, with the success of each depending on the implementation of the others. Capital market reform needs to be holistic and coherent; fragmented and piecemeal implementations should not be expected to have significant impacts on market functioning.
The Spanish public equity market has seen a structural decrease in the number of listed companies in recent years. Since 2000, there have been 200 delistings from the main market, almost twice as many as the 107 new listings (Figure 1.3, Panel A). Similar developments have taken place across many advanced economies, including in the EU on aggregate. This relative lack of dynamism is visible when looking at amounts raised as well, both in the primary and secondary markets, especially since 2018. Between 2018 and 2023, total capital raised on public equity markets (IPOs and SPOs) averaged EUR 6.7 billion annually, 65% less than in the previous 15 years (Panel B). Most activity in recent years has been follow-on offerings from already listed non-financial companies, with total IPO amounts declining by 87% compared to historical averages. Between 2018 and 2023, non-financial company SPOs represented 90% of total capital raised, primary and secondary, on regulated public equity markets in Spain.
Because public equity markets are a key pillar of the capital market ecosystem, this development merits consideration from a public policy perspective. In addition to being conducive to financing innovative and productivity-enhancing ventures, a feature stemming from the perpetual, high-risk nature of equity instruments more broadly, public markets provide the additional benefit of increased transparency. Through widespread investor scrutiny and evaluation of corporate activity, price signals provide information that increase the efficiency of capital allocation. The broad and diversified base of public equity market investors is also a source of resilience for the economy more broadly, allowing companies to access funding throughout the economic cycle by tapping a range of different investors.
Source: BME, OECD Capital Market Series Dataset, see Annex A for details.
A reduction in public equity market activity can therefore lead to a loss of these benefits, with possible detrimental effects for the economy more broadly. However, it does not necessarily imply that companies are undercapitalised, since equity financing also comes in the form of unlisted shares. Looking at the composition of corporate balance sheets, Spain is relatively well-capitalised, with equity funding equivalent to roughly two-thirds of total assets, in line with, for example, France, the Netherlands and Sweden, and higher than the euro area aggregate (Figure 1.4, Panel A). When decomposing total equity financing, however, Spain stands out because of its high portion of unlisted shares and other equity, which together with Italy is the highest among peer countries at 83%, compared to 72% in the euro area on aggregate (Panel B). This means the Spanish economy benefits less from the positive externalities associated with public market activity than most other European countries. It also bears noting that a relatively high level of capitalisation coupled with a large share of unlisted equity should not necessarily be interpreted as a sign of companies having chosen to expand through private rather than public fundraising; these statistics do not say anything about the possible financing constraints faced by the corporate sector in both the public and private markets.
While the split between listed and unlisted equity differs between countries, there is a broader trend in many places, including Spain, of shifting from listed to unlisted equity funding over time (Panel C). This is partly an effect of private equity markets having grown to serve market segments historically more associated with public equity activity (see also section 6). To an extent, the shift towards more unlisted capital has been enabled by an extended period of very low costs of debt and consequent widespread access to private equity, with private equity firms increasingly exiting their investments by selling portfolio companies to other private equity firms rather than taking them public. This has in effect allowed companies to reap the benefits of external capital without the associated costs of a public listing. As those conditions have now changed, with more restrictive monetary policy than in recent years (even considering recent easing), it may lead to a partial reversal of this development and a return to more public market activity, but this should not be taken for granted.
The relative cost of debt and equity financing also depends on tax treatment. The fact that interest payments are tax-deductible while equity financing has no equivalent tax benefit gives debt a cost advantage, all else being equal. This debt bias is common across many countries around the world. To address this imbalance, the European Commission has proposed a reform aimed at reducing the influence of tax incentives on financing decisions. The proposal introduces a so-called Debt-Equity Bias Reduction Allowance (DEBRA) for increases in equity financing. Under the proposal, this allowance is calculated based on the difference between net equity at the end of the current tax year and at the end of the previous tax year, multiplied by a notional interest rate plus a risk premium. Additionally, it includes a 15% reduction in the deductibility of debt interest. Although the Directive was expected to be implemented by 2024, delays in the parliamentary approval process have postponed its adoption, with no specific deadline currently set (BME, 2024[7]; European Comission[8]).
Note: “Other” in Panel A includes e.g. trade credits and advances, other accounts payable, financial derivates, insurance entitlements and deposits. In Panel B, “other equity” refers to item F.519 in the 2010 European System of Accounts (ESA), which includes e.g. equity in incorporated partnerships subscribed by unlimited partners and equity in limited liability companies whose owners are partners and not shareholders.
Source: ECB Sector Accounts.
The fact that there are benefits to the widespread use of public equity markets does not mean that the use of private markets is a negative development. Public and private equity markets are complementary, each playing a different role and constituting a necessary part of a well-functioning capital market ecosystem, and companies themselves are best placed to decide what financing mix is best suited to their needs. An increasing use of private capital may reflect its greater flexibility, speed of deployment, lesser regulatory complexity and lower compliance costs compared to public markets. In an original OECD survey of Spanish corporations prepared for this report, complex regulation and compliance costs are among the most commonly cited reasons for staying private by unlisted companies (see section 3.6). It is therefore important for policy makers to consider whether the regulatory costs associated with a public listing are overly onerous compared to private capital (or, conversely, if private market regulations are too lenient). Ensuring a level playing field between different types of financing and proportionality in reporting requirements are of particular relevance given the broader economic benefits emanating from the use of public equity market.
A necessary starting point for understanding the relative lack of public market activity in Spain is to study the characteristics of currently unlisted companies. A perceived lack of size is the second most cited reason for staying private in the OECD survey. This perception may stem from the very large size of the median company listed on the BME, which is higher than in many much bigger markets. For example, while the total market capitalisation of the BME’s continuous market is around one-fifth of that of Euronext Paris, the BME’s median market capitalisation is 1.4 times higher. This may impact the extent to which smaller companies use capital markets (conditions for SMEs to list are addressed separately under section 1.4). However, not all unlisted companies in Spain are small. Figure 1.5 compares the basic characteristics of the top 20% (for each variable) of large, unlisted companies (defined as those with total assets above USD 100 million) with those of the median company listed on the regulated market of the BME. While this clearly shows that the median BME company is significantly larger than even the largest 20% of unlisted companies, both in terms of assets and revenue, it also indicates that there is a substantial number of unlisted Spanish companies with sufficient size to go public. The 80th percentile of asset size and total revenue among these companies is USD 463 million and USD 412 million, respectively (Panel A). They are also highly profitable, more so than the median listed company (Panel B). The median large, unlisted company is also profitable, although profitability is lower than that of the median listed company.
A lack of size (and profit) thus should not be the only reason companies decide to stay private. To understand why these high-performing, large and profitable Spanish companies remain unlisted, it is necessary to look at the market conditions for listed companies.
Note: Listed companies refer to those traded on the continuous market of the BME. Large unlisted companies are defined as those whose total assets exceed USD 100 million.
Source: LSEG, Orbis, OECD Capital Market Series dataset; see Annex A for details.
The environment affecting a corporation’s decision to go public can be split into two broad categories: pre‑listing conditions and post-listing conditions. While the relevant policies differ, the two are highly interconnected. Post-listing conditions such as ongoing reporting requirements and secondary market liquidity naturally affect a company’s assessment of the utility of going public in the first place. Similarly, even if post-listing conditions are adequate, if the listing process is too onerous and inflexible, companies may still be deterred from going public. Both conditions are addressed in turn below.
1.3.1. Pre-listing conditions
To promote the use of public equity markets, the process for going public should be as efficient and attractive as possible. Certain aspects of this, such as the availability of competent financial advisors, depend on the functioning and sophistication of the private financial sector, but there are also important regulatory aspects. One is the efficiency with which prospectuses are approved. A key benefit of private markets is the expeditiousness and flexibility with which capital can be raised, and from a corporate perspective it is important that using public markets does not imply undue delays and compliance costs.
OECD interviews with market stakeholders indicate broad-based satisfaction with the CNMV’s professionalism during the prospectus preparation and approval phase. A peer review by ESMA (2022[9]) also concludes that the CNMV’s process for prospectus scrutiny and approval is adequate, with the regulator fully meeting expectations in all assessment areas. The exemptions thresholds for prospectus publication are not unduly low and remain in line with other developed markets. However, market participants have noted that the CNMV tends to review already-audited financial statements in much greater detail and more often expresses opinions on accounting structures than regulators in other countries, and that this practice can lead to delays and additional costs. In addition, discussions with market participants indicate that past CNMV procedures have led to bottlenecks during the IPO process (aside from delays or cancellations caused by external circumstances such as adverse market conditions). One such issue relates to the review of documents. Issuers that do not have historical IFRS accounts need to prepare these retroactively (for listing on the regulated market); at the CNMV, these accounts are reviewed by a different department (the Financial Reporting Department) than the one in charge of reviewing the prospectus itself (the Primary Market Department). This is a longstanding practice, but it is not formally reflected in the CNMV’s procedural documentation for public offers (CNMV, 2016[10]). In recent years, there have been periods where the CNMV made these reviews sequentially, requiring the review of the financial statements to be completed and approved before proceeding to the prospectus review rather than running them in parallel, in certain cases adding significantly to the time required to complete an IPO. The authority has since returned to the practice of reviewing documents in parallel, mitigating this concern, although this is not set out in any formal documentation.
In the OECD survey of Spanish companies, the single most commonly cited reason for staying private by unlisted companies is an unwillingness by owners to give up control of the company (Figure 3.16). This concern is also reflected in interviews the OECD has conducted with companies. One way in which this manifests is through low levels of free float, i.e. shares available for trading. If owners are unwilling to give up control, one way to avoid doing so is simply to list a smaller portion of the company. Compared to peers, the Spanish market has among the lowest levels of free float (Figure 1.6, Panel A). The value-weighted free float ratio is 67%, similar to France (66%) but significantly lower than markets such as Sweden (76%), the United Kingdom (92%) and the United States (94%). Since larger companies tend to have higher free float ratios, the median level in Spain is even lower at 49%, also the second lowest among peers. Notably, there is no clear relationship between minimum free float requirements and actual levels of free float across markets. Spain has a minimum free float requirement of 25% established in law (Royal Decree 814/2023, Article 66.7[11]). While that is in line with most other European markets (Panel B), actual levels still differ substantially. The New York Stock Exchange does not apply a minimum ratio at all, rather prescribing a minimum dollar value and number of shares, but still has by far the highest median ratio among the exchanges below.
Most markets that apply a minimum free float requirement allow for waivers that enable levels below the standard minimum in certain cases (e.g. minimum 5% on the main Euronext markets and minimum 10% on Nasdaq Nordic compared to the standard minimum of 25% in both markets, given certain criteria have been fulfilled, notably with regard to size). The Spanish law also allows for exceptions provided that the market is judged to be able to operate with a smaller ratio “due to there being a large number of shares of the same class distributed among the public”, but market participants have indicated that a relatively high minimum rate is typically applied in practice, and that this application is more rigorous than in many other markets. While the intent of this is to obtain higher levels of free float and the associated benefits, it may have the unintended effect of disincentivising some companies from listing at all, contributing to the net delisting trend shown in Figure 1.3 and limiting the investable universe. The UK Financial Conduct Authority (FCA), for example, lowered the minimum free float ratio from 25% to 10% in 2021 to reduce barriers to listing (FCA, 2021[12]).
A similar development is underway at the EU level with the adoption of the Listing Act by the European Commission in October 2024, a package of measures designed to improve access to market-based financing by simplifying the listing process and reducing costs for companies listed on European stock exchanges (European Comission, 2024[13]). A key amendment is the reduction of the minimum free float requirement for trading on EU regulated markets from 25% to 10%. Member states will however retain some flexibility, allowing them to assess whether a sufficient number of shares have been distributed to the public, taking into account the characteristics and size of each issuance (Pérez-Llorca, 2024[14]). Once the directive enters into force, countries have 18 months to transpose it into national legislation.
Note: Refers to the regulated/main segments of each market. * Under the EU Listing Act, the minimum free float will be reduced to 10% for all EU countries. Member States have 18 months to transpose the directive into national legislation once it enters into force. ** Minimum EUR 5 million; *** Minimum SEK 500 million and 500 qualified shareholders, or 300 qualified shareholders if a liquidity provider has been retained.
Source: OECD calculations based on LSEG; BME, Euronext, NYSE, Börse Frankfurt, Nasdaq, London Stock Exchange.
While low free float levels allow owners to retain control while reaping some of the benefits of being publicly listed, it can have detrimental effects on the market as a whole. Firstly, it can reduce market liquidity: higher free float levels are associated with greater liquidity and can help absorb shocks (Ding, Ni and Zhong, 2016[15]). Secondly, because major indices are calculated based on free float-adjusted market capitalisation, markets with low levels of free float have lower weight in these indices. Indeed, Spain is underweighted in major indices not just relative to the size of its economy – its weight in the MSCI Europe index is 3.8%, less than half of its share in the MSCI index constituent countries’ aggregate GDP – but also relative to its share in the constituents’ total market capitalisation (Figure 1.7). Spain’s share in MSCI Europe is about 17% lower than its share in the aggregate market capitalisation of the index constituents. Since large institutional investors often follow index-based strategies, markets (and individual companies) with limited index weightings tend to receive less institutional investor investment. Given the importance of these investors in global capital markets, this can limit access to finance and drive up the cost of capital.
Note: The MSCI Europe index constituent countries are Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Italy, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the United Kingdom. Market capitalisation refers to regulated markets. Shares calculated based on country of listing.
Source: OECD calculations based on Eurostat, LSEG, MSCI; OECD Economic Outlook 115.
One way to address the tension between owners’ preference to retain control and ensuring a high level of shares available for public trading, with its associated benefits, is the use of share classes with differentiated voting rights. Somewhat surprisingly, given that an unwillingness to lose control was cited as the most common reason for staying private, a majority of companies in the OECD survey, both listed and unlisted, did not consider the existence of multiple voting right shares to be important (Figure 3.18). The share of companies citing it as important was somewhat higher among unlisted companies (32%) than among listed ones (26%).
The presence of share structures with different voting rights varies across countries and industries. In the United States, it is primarily used by technology companies to retain founder influence, whereas in Europe there are no clear industry trends, but large differences between countries. For example, multiple voting share structures are very common in. France and Sweden but they are rare in Germany and Switzerland. The type of structure used to achieve differentiated voting rights also differs between countries. One setup is loyalty shares, where increased voting rights accrue to shareholders as they hold the shares for longer (meaning shares do not technically belong to different classes). Spain introduced such loyalty structures for companies listed on regulated markets in its legislation in 2021 (Freshfields Bruckhaus Deringer, 2021[16]). This is the default share structure in France (ISS, 2023[17]).
Another structure, more focused on founder control retention, uses share classes that always carry different voting rights. This is common in Sweden, for example, where the law allows for share structures in which one share class has up to ten times the voting rights of the share class with the least voting rights. To address founder control concerns and incentivise SME listings, the European Commission has adopted a directive on minimum harmonisation of rules across the EU, allowing for such multiple voting right structures for companies listing on an MTF for the first time, although with certain constraints (European Comission, 2024[13]). The United Kingdom has also expanded the use of dual class shares to the premium segment of the market, with ongoing discussions to ease the constraints further (A&O Shearman, 2024[18]). Similar initiatives have been introduced in several Asian jurisdictions, including China, Hong Kong (China) and Singapore (Liang, Nguyen and Zhang, 2022[19]). In 2023, index provider S&P Dow Jones removed the restriction on eligibility for index inclusion in its major indices for companies with multiple share class structures which had been introduced in 2017 (S&P Global, 2023[20]).
The debate on the merit of multiple voting right shares is, however, inconclusive. Certain of the abovementioned initiatives have been criticised by investors and investor representatives as weakening shareholder protection (Agnew, 2024[21]). Since February 2024, leading proxy advisory firm Institutional Shareholder Services (ISS) generally recommends voting against the election or re-election of directors in companies that have unequal voting right arrangements (ISS, 2024[22]). With these nuances in mind, it should be considered whether differentiated voting structures could help incentivise the use of public equity markets in a market characterised by family ownership.
1.3.2. Post-listing conditions
Arguably one of the most important conditions once a company is listed is the level of secondary market liquidity. This is reflected in responses to the OECD survey, where the single most important challenge, cited by 59% of companies, was low liquidity (Figure 3.10). The third most commonly cited challenge was share price volatility (45%), which to an extent is an effect of illiquidity. High liquidity improves the price finding mechanism, tends to boost asset prices and triggers increased public equity market issuance (Amihud and Mendelson, 1991[23]; Hanselaar, Stulz and Dijk, 2017[24]). Improving liquidity conditions is thus an important part of increasing the attractiveness of a market. In Spain, liquidity on the main exchange (BME) has decreased substantially over time (Panel A, Figure 1.8; see also section 4.8). This is in part an effect of increased fragmentation in trading across different venues following regulatory and technological developments (OECD, 2016[25]). However, trading volumes have also decreased by nearly a third between 2018 and 2023 when looking at total trading in Spanish equities admitted to trading on Spanish markets (Figure 1.8, Panel B).
Note: Panel A is based on BME electronic order book equity trading statistics. Panel B refers to both lit and dark trading subject to market or MTF rules of securities with a Spanish ISIN admitted to trading on Spanish official secondary markets. Cboe data include trading that took place through Chi-X and BATS until 2020.
Source: BME, CNMV (2022[26]; 2023[27]) .
Market participants have noted that one reason for the decrease in trading on the BME is the significantly higher cost compared to other European markets. A key driver of these higher costs is the Post-Trade Interface (PTI), a system introduced with TARGET2-Securities (T2S) to track share ownership throughout the trading process. However, the latest Securities Law (6/2023) considers the PTI redundant, given new European regulations that aim to harmonise procedures across member states. Consequently, the law removes the requirement for the central securities depository to use the PTI, allowing for a two-year transition to the new regulatory framework. The removal of the PTI is expected to reduce trading costs and ease administrative burdens. Going forward, custodians will be responsible for tracking ownership instead of relying on supervision through the settlement process (Société Générale, 2023[28]).
The availability of securities lending – a transaction whereby an investor temporarily lends a security to another party against collateral and a fee – also has an impact on secondary market liquidity. This process facilitates several important financial market functions, including risk management, market making, hedging, arbitrage and other trading, contributing to increased market efficiency and liquidity. Contrary to most European peer countries, including the EU’s Undertakings for Collective Investment in Transferable Securities (UCITS) Directive, Spain does not currently allow collective investment schemes (CIS) – investment funds – to engage in securities lending outside of certain specific cases (related to credit provision in the spot market and central counterparty/central securities depository lending). The existing Spanish legal framework (Law 35/2003, article 30.6) does allow for CIS securities lending, but first requires approval through Ministerial Order (BME, 2024[7]). The Ministry of Economy, Trade and Business has started the regulatory process for doing so, launching a public consultation in September 2024 (Ministerio de Economía, Comercio y Empresa, 2024[29]).
Another important driver of liquidity is transparency. Greater transparency tends to lower trading costs and increase liquidity (Pagano and Röell, 1996[30]). In this respect, a proposal to create an EU-level consolidated tape provider (CTP), which will provide trading data “as close as possible to real time” for equities, bonds and derivatives, has recently been adopted (European Council, 2024[31]). This should facilitate trading and improve liquidity conditions across EU markets, including Spain. More generally, many measures that serve to increase capital market activity in a broad sense would also improve liquidity. These measures include boosting the role of institutional investors (section 1.5) and retail participation (section 1.6).
Finally, an important aspect of the attractiveness of a market from a company perspective is the possibility of simultaneous listing in another market (dual listing) and the ease with which such a process can be undertaken. This is particularly relevant for companies with significant international presence. An infrastructure that enables dual listings, notably with respect to central depository procedures and IT systems, can therefore be an important way of retaining significant companies on domestic markets. There are no legal barriers in Spain restricting domestically listed firms from listing on other exchanges.
To improve conditions for stock market listing and trading, Spain could:
Finalise the process of approving a Ministerial Order to allow Collective Investment Schemes (CIS) to engage in securities lending operations and consider extending eligibility to other vehicles such as pension funds.
Accelerate the update of the BME stock exchange’s operational system to align it with that of SIX and other international exchanges.
Assess the adequacy of the existing minimum free float framework and the application of waivers.
Introduce a tax allowance for corporate equity in line with that set out in the EU’s DEBRA proposal to remove the current tax bias towards debt financing.
Initiate a dialogue with companies through a business organisation such as CEOE or CEPYME, jointly with stock exchange operators, to understand what regulatory arrangements would help increase capital market activity.
Assess whether the existing infrastructure with respect to, for example, central depository procedures and IT systems create undue barriers to dual listings in other markets.
The Spanish public equity market has seen a decline in recent years, both in terms of primary and secondary market activity. Spanish companies rely on unlisted equity to a significantly larger extent than in most other European countries and the free float ratios of listed companies are low. Consequently, the Spanish market is underrepresented in major international indices, impacting institutional investor capital flows. This limited equity market activity cannot be attributed to a lack of dynamism in the corporate sector alone, since there is a pool of sizeable and profitable Spanish companies that have chosen to remain unlisted. Improving the conditions for stock market listings, both before and after going public, should therefore be a priority. This includes not only traditional IPOs but also alternative ways of going public such as direct listings. A number of policy initiatives to improve the conditions for stock market listings are outlined below.
Given the decrease in liquidity observed in the Spanish market in recent years, authorities and market infrastructure providers should consider measures to facilitate trading. The process of issuing a Ministerial Order allowing securities lending operations by CIS in line with what is provided for in Article 30.6 of Law 35/2003 should be finalised. Additionally, to further enhance market liquidity, the possibility of extending eligibility of securities lending to other vehicles, such as pension funds, should be evaluated.
To stimulate greater activity in the Spanish market, it is also essential that the main exchange’s operational systems are integrated with those of other international exchanges. Currently, the BME’s systems differ from those of other major exchanges – including those of SIX, its owner. Integrating these systems could facilitate cross-border trading, enhance liquidity, and encourage broader market participation. Although progress is being made in this regard, this is set to be a multi-year process. Accelerating progress on this integration would help promote trading activity in Spain.
In order to increase index representation and international institutional investor inflows to Spanish markets as well as to boost liquidity, efforts should be made to increase the relatively low current free float in the market. This could include an evaluation of the adequacy of the existing free float requirements for IPOs and the relative infrequency with which waivers are applied, keeping in mind that in an international comparison there seems to be no clear correlation between minimum requirements and the actual level of free float in the markets, and that an excessively high minimum requirement may disincentivise certain companies from listing altogether. This should be done within the framework of the recently agreed new minimum thresholds set out in the EU Listing Act. In addition, an allowance for equity like the one set out in the EU’s DEBRA proposal could be implemented in Spain to reduce the existing imbalance that gives debt financing a favourable tax treatment and to further incentivise equity financing.
An unwillingness to lose control of the company is the most cited reason for staying private among unlisted Spanish companies. Measures to alleviate this concern should be considered. In addition to evaluating whether more leniency with respect to the minimum level of free float would be appropriate, the usefulness of alternative control-enhancing mechanisms focused on founder control retention such as multiple voting right shares could be explored. These efforts should be aligned with similar initiatives for SME growth markets at the EU level in the context of the Listing Act. It should be noted that such structures were not cited as important by a majority of respondents in the OECD survey of Spanish companies, so these assessments should be done in consultation with both listed and, in particular, large unlisted companies to understand what arrangements would be beneficial to increased equity market activity. This dialogue could be initiated with business representation bodies such as the national SME organisation CEPYME and/or other relevant bodies such as CEOE.
Finally, while there are no legal barriers to dual listing in Spain, the infrastructure (notably with respect to central depository procedures and IT systems) for dual listings in other markets, notably the United States, should be evaluated to ensure that it does not disincentivise large, international companies from being domiciled and listed in Spain.
Small and medium-sized enterprises (SMEs) play a crucial role in the Spanish economy, constituting over 99% of all businesses in the country. They contribute significantly to employment, comprising around two-thirds of the workforce, generate 57% of total value added and over 30% of GDP. However, Spanish SMEs are less productive compared to European counterparts (see Chapter 2) and tend to innovate less in both their products and business processes (EC, 2023[32]). Additionally, Spanish SMEs encounter significant challenges in accessing external finance, resulting in a limited use of market-based financing. This underutilisation of capital markets can be attributed to several factors, including a lack of awareness and understanding among SMEs about the potential benefits and a consequent overreliance on traditional financing sources such as bank loans. Moreover, regulatory disincentives associated with stock exchange listing and the limited investor demand for SME stocks act as further deterrents to entering the equity market for smaller companies.
Capital markets can offer long-term funding opportunities for SMEs during the growth phase, facilitating expansion plans and enabling them to diversify their financing sources. It is therefore crucial to develop the necessary tools to enhance SMEs’ access to market-based financing, which could boost productivity and economic growth in Spain.
According to a survey conducted by the EIB, 68% of Spanish SMEs identify a lack of available financing as a significant long-term barrier to investment (Figure 1.9, Panel A). This figure contrasts with European peers. In the Netherlands and Sweden, for example, only 19% and 34% of firms, respectively, perceive access to finance as an impediment to investment. Moreover, the gap between small and large firms is also wider in Spain compared to other countries. In Spain, 50% of large firms consider access to finance as a barrier to investment, which is 18 percentage points lower than the figure for SMEs. Spanish SMEs express significantly more negative views regarding the near-term availability of external finance than large enterprises. Specifically, the net balance in the perception of credit conditions (the share of firms expecting an improvement minus the share of firms expecting a deterioration in the next twelve months) was -17% for SMEs, in contrast to -2% for large enterprises (Figure 1.9, Panel B). This size gap is by far the highest among its peers, reflecting the fact that SMEs in Spain not only face higher barriers compared to other European countries but are also substantially disadvantaged compared to larger domestic firms. It bears mentioning, however, that the same survey suggests that the proportion of firms in Spain that were either dissatisfied with the amount of external finance they received, did not receive any, or chose not to seek it due to anticipated high costs or fear of rejection is relatively low (EIB, 2024[33])
Note: Panel A shows the percentage of companies considering the availability of finance either as a major or minor obstacle. Panel B is based on responses to the question, “Do you think that [the availability of finance] will improve, stay the same, or get worse over the next 12 months?”. The net balance is calculated as the share of firms expecting an improvement minus the share of firms expecting a deterioration.
Source: EIB Investment Survey 2023.
The negative outlook on external financing availability underscores a fundamental issue in the funding structure of Spanish corporations. As highlighted in the analysis of the OECD survey, Spanish firms rely heavily on bank financing (see Chapter 3). A separate survey conducted by the Bank of Spain as part of a project with the OECD International Network on Financial Education (INFE) specifically targeting micro and small enterprises supports this finding across companies with less than 50 employees. Notably, the most used instrument is bank loans, employed by 53% of companies, followed by bank overdrafts or credit lines (39%). A significantly lower share of companies (14%) use other sources of debt financing such as corporate bonds. The survey also underscores the limited use of equity instruments by micro and small firms. Only 5.4% of the companies surveyed reported using public equity, and just 2.7% and 2.6%, respectively, have received venture capital and business angel financing (Figure 1.10).
The strong reliance on bank-based financing is partly a result of a lack of awareness and information about other financial options by SMEs. Only 53% of business owners correctly answered a question testing their understanding of concepts such as equity and ownership. Thirty-four per cent of respondents did not consider different options for financial products and services. These shortcomings are more prevalent in smaller-sized companies (Bank of Spain, 2021[34]).
Source: Bank of Spain (2021[34]), Survey on small enterprises’ financial literacy. Refers to companies with less than 50 employees.
1.4.1. Public equity markets
Acknowledging the challenges SMEs encounter in accessing external finance, the BME established an alternative stock market in 2006, the MAB, renamed BME Growth in 2020, which operates as an MTF. This segment is specifically designed to facilitate access to capital markets for SMEs in a growth and expansion phase (see Chapter 4, Section 4.4). At the end of 2023, 58 (non-REIT) companies had their primary listing on BME Growth, a significantly lower figure than on other European growth markets (Figure 1.11, Panel A).
Listing on public markets can be particularly costly for SMEs. Part of the costs that they incur relate to supervisory fees. In Spain these are charged by the CNMV and are currently set at nominal rates under laws 16/2014 and 6/2023. The supervisor has no authority to change these. Some fees, notably for prospectus review, are set at a flat rate. While recognising that these fees represent a small portion of the total costs associated with going and staying public (the lion’s share being related to legal and financial advisory fees), the flat fee structure still places a disproportional burden on smaller companies, which need to pay substantially higher fees relative to their size compared to larger ones.
Moreover, while the main efforts related to growth markets should be to attract smaller companies that currently do not see a stock market listing as a feasible option, it bears noting that the number of companies on BME Growth with a market capitalisation exceeding EUR 500 million is very limited (Figure 1.11, Panel B). This could be because companies of that size find the regulated market better suited to their needs, but another factor likely influencing the number of larger companies in the growth market is the mandatory requirement in Spain for companies with a market capitalisation over EUR 1 billion (for a continuous period of six months) to apply for admission to the main market (set out in Law 6/2023). Companies have a period of two years to complete the transition. A legislative proposal has been put forward in Spain to eliminate the requirement to shift market segments based on market capitalisation. This is in line with practices in peer countries (BME, 2024[7]).
Note: Refers to primary listings. Excludes REITs. Panel A refers to companies listed on the growth segments of the national markets in each jurisdiction. Minor discrepancies between the number of companies shown for Spain in Panel A of this figure and Table 4.7 are due to differences in industry classification between BME and LSEG for certain REITs; the exclusion of non-primary listings here; and the fact that dual share classes are only counted as one company in this figure. The LSEG industry classification has been used in this figure to ensure international comparability between markets.
Source: OECD Capital Market Series dataset; see Annex A for details.
Capital raised through IPOs on BME Growth has been limited, although there has been some growth over time, particularly in 2021 and 2022. In 2022, 10 companies raised a record total of EUR 128.5 million. However, 2023 saw a significant downturn, in line with broader market trends, with IPOs dropping to EUR 35 million (Figure 1.12, Panel A). Furthermore, the size of IPOs on BME Growth has increased over time, with an average size of EUR 11.5 million between 2017 and 2023, compared to EUR 4.2 million over the preceding 7 years. In terms of industries, Oil and Energy is the largest sector, representing 34% of total proceeds raised. The second largest sector is Technology and Telecommunications, which accounts for 21% of the funds raised since 2010.
Note: Excludes REITs. In Panel A, the average size of IPOs excludes companies that listed without raising any capital.
Source: OECD Capital Market Series Dataset.
A notable development implemented in order to facilitate access to capital markets for potential high‑growth companies was the establishment of BME Scaleup in 2023, a market primarily tailored for scale‑ups.1 This market offers more accessible regulatory requirements and incorporation processes (see section 4.4.2), making access to the equity market more feasible for companies that do not meet the reporting prerequisites for listing on BME Growth. In addition to simplified admissions requirements and processes, companies listed in this market as well as those aiming to list on other BME segments have access to Entorno Pre Mercado (Pre‑Market Environment), a programme that provides training and networking opportunities for SMEs to familiarise themselves with capital market operations and to facilitate connections with private and institutional investors. Spain also has another Multilateral Trading Facility (MTF) called Portfolio Stock Exchange, which has been operating since 2023. This exchange uses a digital model focused on reducing the number of intermediaries and providing flexible listing requirements. For example, there is no minimum free float requirement (Portfolio Stock Exchange[35]). Although it targets all types of companies, to date this market has mainly attracted SOCIMIs (REITs).
Research on listed firms is also an important part of a capital market ecosystem. Providing investors with easily accessible information and analysis about companies, industries, and market trends helps them make informed investment decisions and contributes to improved liquidity of listed stocks (Roulstone, 2003[36]). However, since the implementation of the EU’s MiFID II in 2018, investment firms have been required to separate the expenses associated with research from those tied to executing trades (known as “unbundling”), a provision aimed at preventing potential conflicts of interest. This rule has had adverse effects on the analysis and research coverage of firms, particularly impacting smaller companies, and the market capitalisation threshold for which bundling is allowed is being removed with the EU’s Listing Act package (PwC, 2024[37]). While this challenge is not exclusive to the Spanish market, extending throughout Europe, Spain’s high proportion of companies with low market capitalisation has resulted in a notable increase in firms with limited or no coverage. According to data from the Instituto Español de Analistas, between 2017 and mid-2024, the average number of analysts covering firms with a market capitalisation below EUR 300 million decreased by 38.5%. Although coverage has declined for all groups of firms regardless of size, the decrease has been significantly greater among companies with lower market capitalisation. To address this issue, the Instituto Español de Analistas and BME jointly implemented a project known as Lighthouse, aimed at providing fundamental analysis of firms listed on the Spanish market that lack research coverage. The project has shown some indications of increasing aggregate liquidity for the companies covered over the last two years, contrary to the broader market. While this initiative has made progress in decreasing the number of firms without research coverage, the availability of analysts focusing on SMEs in the Spanish market remains limited.
Enhancing foreign participation is also crucial to strengthen the functioning of Spanish capital markets. Currently, the Spanish law exempts from taxation any income derived from the transfer of securities and redemptions of investment fund shares carried out in any of the regulated markets in Spain and obtained by individuals or non-resident entities without a permanent establishment in Spanish territory, that are resident in a state that has signed a double taxation with Spain (Royal Legislative Decree 5/2004[38]). However, this exemption does not apply when the income is derived from an MTF.
1.4.2. Fixed income markets
An Alternative Fixed Income Market (MARF) was also introduced in 2013 to channel funds to companies seeking more flexible requirements and faster issue procedures than on regulated markets (BME, 2023[39]). However, over the past decade, corporate bond issuances in this market have been relatively limited, with the total amount issued averaging less than EUR 300 million (Figure 1.13, Panel A). Although the total number of companies seeking finance through MARF has increased gradually, issuance has primarily been commercial papers rather than corporate bonds. Since 2016, the share of total issuance made up of corporate bonds has ranged between 1% and 18%, decreasing over time (BME, 2023[40]). Commercial paper is typically used to finance short-term liabilities and are thus less suitable for longer-term investments but can sometimes serve as a company’s first engagement with capital markets. While over half of the companies issuing in this market (including non-bond issues) are large, MARF has also attracted a significant number of small and medium-sized companies, accounting respectively for 26% and 22% of the total number of companies (Figure 1.13, Panel C).
Note: Panel C includes issuers of corporate bonds, commercial papers (pagarés), mortgage notes (cédulas hipotecarias), asset-backed bonds (bonos de titulización) and preferred shares (participaciones preferentes). Companies are classified according to the following criteria: small - less than 50 employees; medium - between 50 and 259 employees; large - 250 or more employees.
Source: BME.
1.4.3. Private equity markets
In the private equity sphere, there are long-standing government initiatives to promote investment in smaller companies. AXIS, the venture capital subsidiary of ICO currently manages four funds. Fond-ICO Pyme (previously Fond-ICO) was established in 1993 with the objective of promoting the corporate sector through investments in Spanish SMEs. It currently has a size of EUR 250 million and invests directly in companies with projects that have significant social or sustainability impacts, as well as in funds targeting companies that develop projects that have a significant social and/or sustainability impact. Investments in general venture capital and private equity funds are made by Fond-ICO Global, which was launched in 2013. This fund-of-funds aims to enhance non-bank financing for Spanish SMEs by increasing their capitalisation levels and to promote the creation of privately managed equity funds to invest in Spanish companies at various growth stages (ICO[41]). Fond-ICO Global’s current endowment amounts to EUR 4.5 billion, following a 2020 expansion of EUR 2.5 billion for the subsequent 5 years. More recently, in 2022, Fond‑ICO Next Tech was launched with the aim of fostering innovative, high-impact digital projects. Currently, this fund manages EUR 4 billion, and investments are directed towards both private equity funds and companies in the digital and artificial intelligence sectors targeting companies in the scale-up phase. Finally, Fond-ICO Sostenibilidad e Infraestructuras, established in 2018 with a size of EUR 400 million invests directly in companies with greenfield projects and in infrastructure funds investing, mainly, in Spanish companies. The implementation of these initiatives has contributed to the development of a successful private equity sector in Spain. However, there remains considerable potential for improvement, evident in fundraising, investment, and divestment figures, which lag those of European counterparts such as France, the Netherlands and Sweden (see Chapter 6). Additionally, the proportion of small firms using private equity financing remains limited (Figure 1.10).
To nurture a vibrant SMEs growth market, Spain could:
Establish a co-operation between exchange operators and the Chamber of Commerce, possibly including the Ministry of Economy and CNMV, to promote the use of market-based financing among SMEs.
Finalise the removal of the obligation to transition from an MTF to a regulated market once market capitalisation reaches EUR 1 billion.
Grant the CNMV greater flexibility to vary supervisory fees depending on firm size.
Support research providers (independent research firms, industry analysts, etc.) in delivering research coverage and analysis of SMEs, whether by data provision, subsidies or other means.
Consider extending tax exemptions for non-residents on income generated from the transfer of securities listed on Spain’s main market to also cover MTF securities.
Support SMEs in taking advantage of the financing available via the AXIS Funds.
Spanish SMEs face significant barriers to access external financing, putting them at a disadvantage not only compared to other European countries but also to larger domestic firms. Increasing SMEs’ access to a diverse range of funding sources beyond traditional bank-based financing would fuel their growth, long‑term investment and innovation, and should thus be a policy priority. A number of policy initiatives to nurture vibrant SME markets are outlined below.
A co-operation between Spanish stock exchange operators, private capital associations and the Chamber of Commerce could help raise awareness among Spanish SMEs about the benefits of using market-based financing. In the OECD survey of Spanish companies, nearly 80% of respondents indicated that they had not been approached by any market actor to encourage them to publicly list or to provide information about the costs and benefits associated with a listing in the past three years (Figure 3.17). Given the Chamber of Commerce’s broad representation across the economy, it could play a key co-ordinating role in identifying SMEs with growth potential yet lacking adequate financing and connecting them with relevant market actors. This public-private initiative could include educational seminars, workshops and informational campaigns led by stock exchange experts, aiming to equip SMEs with the necessary knowledge and resources to effectively evaluate funding alternatives, providing insights into the procedures required in each case. It should also seek to raise awareness among smaller companies about the introduction of a European Single Access Point (ESAP) and the possibility of voluntarily submitting information to be made accessible through this portal, making their financial performance (along with non-financial data, as relevant) accessible to a broad range of potential investors. Such a co-operation could also include, or be co-ordinated by, the Ministry of Economy and/or the CNMV.
Another way to incentivise SMEs to go public could be to remove the requirement for companies listed on a Spanish MTF to transition to the main market once its market capitalisation exceeds EUR 1 billion for a continuous period of six months. This threshold was raised in Royal Decree-Law 34/2020 (previously set at EUR 500 million), and companies have a transitional period of maximum two years during which they can benefit from certain exemptions from publication and dissemination of information (Law 6/2023[42]). There is a current legislative proposal to repeal the obligation to change markets entirely. This proposal should be implemented to avoid disadvantaging companies that would prefer to continue being listed on a Spanish MTF, and which otherwise may opt to list on foreign MTFs in countries that do not have such a requirement. Moreover, to alleviate costs during the listing process it is recommended first that the CNMV is given authority to alter the supervisory fee structures (not limited to prospectus review), and that it then systematically applies variable fees based on company size (e.g. market capitalisation).
To ensure the effectiveness of capital markets targeting SMEs, it is crucial not only to promote companies’ adoption of market-based financing, but also to facilitate investor engagement. Insufficient demand may deter companies from using market-based financing. A significant factor contributing to this low demand is the limited research coverage for SMEs. To address this issue, supporting and incentivising research providers such as independent research firms, industry analysts and sell-side research firms in delivering their research services to small cap companies, whether through data provision (by bodies such as the Bank of Spain or business organisations such as CEPYME), subsidies or other means, could increase demand for SME stocks. Additionally, extending tax exemptions for foreign investors to include MTFs could stimulate investments in SMEs listed in markets such as BME Growth. If necessary to maintain current tax policies with respect to REITs, the exemption could exclude transactions in fund shares traded on an MTF.
Private equity, especially venture and growth capital, is a significant alternative financing source for SMEs. To further strengthen the Spanish private equity sector, national authorities could consider supporting SMEs in accessing financing through the AXIS funds. For instance, authorities or business associations could organise groups of SMEs seeking financing, offer informational support, and facilitate meetings between these companies and the managers of AXIS-targeted funds.
Institutional investors – pension funds, insurance companies and investment funds – are at the centre of global financial markets. In a context of continuously increasing ownership concentration, they are the single largest investor category globally, holding 44% of public equity (OECD, 2023[43]). That makes institutional investor capital a significant source of funding for companies and an important driver of capital market dynamism. In the OECD survey of Spanish companies, increased institutional investor attention was cited by listed companies one of the most important reasons for continuing to be listed, cited by 86% of companies. The ownership structure of the Spanish equity market is characterised by two things: a relatively low level of institutional investor participation in general and a very low share of domestic institutional investor ownership in particular. At the end of 2023, 26% of Spanish public equity was held by institutional investors, compared to 31% in the EU as a whole and 43% in the Netherlands (Figure 1.14, Panel A). Only 1.2% of this was held by domestic institutional investors. That is equivalent to less than one-twentieth of total institutional investment, compared to 20% in the EU on aggregate and as much as 49% in Sweden (Panel B).
Note: Panel A shows institutional investor ownership as a share of total listed equity in each market.
Source: OECD Capital Market Series Dataset.
These characteristics hold for all types of institutional investors and across different financial instruments. Compared to a group of peer countries (France, Germany, Italy, the Netherlands and Sweden), Spanish institutional investors’ holdings of both equity and debt securities are low as shares of GDP (Figure 1.15). The greatest difference is visible in equity holdings, where the average levels in Spain are only 15% of those in peer countries. Pension funds and insurance companies’ equity holdings amount to 1.4% and 1.2% of GDP, respectively. Debt security holdings are also lower than in peer countries, but the levels are more similar than for equity (three-fifths of peer country levels on average), indicating a generally more conservative asset allocation.
Note: The peer countries included in the average are France, Germany, Italy, the Netherlands and Sweden. Source: OECD Institutional Investor Statistics, Eurostat.
The lack of a strong domestic institutional investor base can be a significant barrier to local capital market development. Strengthening this activity should therefore be a policy priority. Because of their different characteristics, a specific approach is needed for each institutional investor category. The below subsections provide assessments of the activity and policy environment for the three traditional categories (pension funds, insurance companies and investment funds) in Spain.
1.5.1. Pension funds
Pension funds are significant investors in certain markets. In the United States, for example, pension fund assets amounted to USD 26.4 trillion at the end of 2023, plus another USD 13.6 trillion in individual retirement plans for a total of USD 40 trillion, roughly one and a half times GDP (US Federal Reserve, 2024[44]). Their long-term investment horizons make pension funds well-suited to capital market activity and thereby an important potential source of capital for companies. In addition, returns on capital invested can help ensure the sustainability of pension systems and provide retirees with sufficient income.
However, the amount of capital available in pension funds and the extent to which they invest in capital markets depends on the design of pension systems. Pension funds can only be significant investors if asset-backed pensions make up a sizeable portion of total entitlements. In countries where pay-as-you-go systems, which are instead funded by contributions through taxes levied on currently active workers, are dominant, pension funds are naturally significantly smaller. This latter model is common throughout the EU, with a few notable exceptions (the Netherlands, Denmark and Sweden). Spain has the highest level of pension entitlements in the EU at 501% of GDP. Less than one per cent of this refers to funded entitlements (Figure 1.16). At the same time, it has one of the highest theoretical gross replacement rates (pension benefits at retirement relative to earnings when working) in the OECD at 80% (OECD, 2023[45]).
While the pay-as-you-go system would remain the key pillar of the pension system, increasing the share of funded entitlements would help diversify Spanish pension savings. In addition, by growing the assets of institutional investors, it could be an important catalyst for further capital market activity. It bears noting that this does not imply a replacement or reduction of the state pension system (Pillar I) in absolute terms; it can be done by incentivising the establishment of and investment in asset-backed occupational (Pillar II) and individual (Pillar III) schemes, which can grow to represent a larger share of total entitlements over time.
Note: Data not available for Poland. Source: Eurostat.
Reflecting the small portion of funded entitlements, the aggregate size of occupational pension schemes (Pillar II) in Spain is no more than EUR 37 billion, roughly 2.5% of GDP (Figure 1.17, Panel A). This compares to EUR 1.6 trillion in the Netherlands, EUR 273 billion in Sweden and EUR 214 billion in France (EIOPA[46]). The number of participants in Spain is 2.4 million, equivalent to 10% of the labour force (Eurostat[47]). Aside from an uptick in participation in 2024, total assets and the number of participants have both remained relatively constant for the past 15 years. Individual pension plans (Pillar III) have seen stronger growth, both in the number of participants and total assets. At the start of 2024, they had 7.3 million participants and total assets under management of EUR 88 billion (Panel B). However, much of this growth took place in the 1990s. The total assets under management are similar in real terms to what they were in 2016, and the number of participants has decreased from a peak of 8.6 million in 2008. In 2021, as part of Law 11/2020 on the General State Budget for 2021, the amount of tax-deductible personal pension plan contributions was lowered from EUR 8 000 to EUR 2 000, which was further reduced to EUR 1 500 in 2022. The deductibility was simultaneously increased to a maximum of EUR 8 500 for contributions to collective plans provided that a certain share (varying depending on salary levels) of contributions is made by the employer (Law 35/2006, 2006[48]; Ius Laboris, 2022[49]).
In addition, a reform to the Spanish pension plans and fund regulation, applicable from 2015, introduced the possibility of unlimited early withdrawals from pension plans, with the aim of increasing contributions among the younger population. This applies to contributions made at least ten years before, with first withdrawals available from 2025. According to Inverco, the Spanish association of collective investment institutions and pension funds, the amount of funds eligible for early redemption totals EUR 78.6 billion, of which roughly 70% refers to personal plans and 30% to occupational plans. Early withdrawals, if done at scale, reduce the predictability and shortens the investment horizon of pension funds, pushing them towards more liquid portfolios and thus possibly reducing their ability to contribute to longer-term projects in the real economy. It may also result in lower benefits at retirement (OECD, 2021[50]).
Source: Inverco.
Compared to many peer countries, the share of occupational pension fund assets invested directly in listed and unlisted equities is low in Spain. At the end of 2023, it stood at less than 6% of total investment assets, compared to 43% in Sweden and 25% in Italy (Figure 1.18, Panel A). However, exposure to equities through investment funds (which make up 57% of total investment assets) is relatively high. Thirty‑seven per cent of Spanish occupational pension funds’ investment fund shares are held in equity funds (Panel B). When combining direct and indirect equity exposure, the Spanish share is similar to the peer country average at 27% (Panel C).
Regulation allows for this share to increase further. Spanish pension funds are theoretically allowed to invest 100% of their assets in equities traded on a regulated market (30% for securities not admitted to trading on a regulated market) (OECD, 2024[51]). While the asset allocation is best decided by the fund itself, taking into account the liability structure and risk profile of members, large institutional investors can contribute to important shifts in broader financing structures. A greater allocation to listed equity, for example, could make listed equity financing more accessible to corporations and therefore help reduce the reliance of Spanish companies on unlisted equity (see Figure 1.4, Panel B).
While regulation allows holdings of private investment fund shares to reach up to 30% of the total portfolio, there are limitations on the management and depository fees that occupational pension funds are allowed to pay. This limitation was originally set at 1.5% of the total balance in the relevant account annually (Royal Decree 681/2014[52]), but was later differentiated based on fund strategy, as follows: 0.85% for fixed income funds, 1.3% for mixed strategy funds and 1.5% for other funds (Royal Decree 62/2018). Royal Decree 668/2023 subsequently further established that this limit is accumulative for investments in private equity firms or closed-end funds that are part of the same group as the management entity, but for non-group funds an additional 0.55% fee is allowed on top of the general limit (Boletín Oficial del Estado[53]; CECA, 2023[54]). Some market participants have indicated that, while these changes have made private equity investments more flexible, the limits still lead to an effective restriction on investments in private equity funds, which typically carry higher fees, but which can also offer an effective venue through which to invest in a diverse pool of unlisted companies with the potential of higher returns. Spanish pension funds’ allocation to private capital investments currently represents less than 1% of the total portfolio (SpainCap, 2024[55]).
Note: Panels A and B show exposures as shares of total investments. Derivatives exposure is negative in the Netherlands. Source: EIOPA IORP statistics.
1.5.2. Insurance companies
The Spanish insurance sector is characterised by two main attributes: a relatively small size and a very conservative asset allocation. Insurance companies’ equity and debt security holdings peaked at 25% of GDP in 2020 (of which debt securities represented 22 percentage points), before dropping to 16% in 2022, driven by a large decrease in the valuation of debt securities following the increase in central policy rates around the world (Figure 1.19, Panel A). The sector’s total asset size at the end of 2023 was EUR 282 billion, equivalent to 19% of GDP. That is the lowest figure among peer countries both in absolute terms, around one‑fifth of the average, and as a share of GDP, less than a third of the average (Panel B).
Source: OECD Institutional Investor Statistics; EIOPA; Eurostat; IMF.
The conservative asset allocation visible in the split between equity and debt securities stands out when compared internationally. Direct investment in equities represents the lowest share of total assets among peer countries at 7.6% (Figure 1.20, Panel A). Like occupational pension funds, the indirect equity exposure through investment funds is much higher, at 46% of total investment fund shares, the second highest among peer countries (Panel B). However, since investment fund shares make up a relatively small share of total assets (12%), this has a minor effect on total equity exposure including indirect exposure. The relatively limited exposure to investment funds is partly an effect of changes to accounting standards for institutional investors, specifically the introduction of IFRS 9 at the start of 2023,2 which does not consider look-through data for non-consolidated investment funds, instead considering them as puttable instruments. This means valuation changes flow through to the profit and loss statement, which has incentivised certain insurers to substitute direct for indirect exposure (DWS, 2019[56]; KPMG, 2021[57]). Including both types of exposure, Spanish insurance companies’ allocation to equities is 13%, less than half of the peer country average. Instead, they are heavily dependent not just on debt securities generally, but on sovereign bonds in particular. Government debt makes up nearly half of total assets, almost three times the peer country average, and 13 percentage points more than Italy, which has the second highest exposure (Panel C).
Stakeholders consulted by the OECD have indicated that insurance company asset allocations are largely driven by regulatory concerns regarding targeted solvency ratios associated with Solvency II, as well as a desire to maintain a high credit rating. Importantly, however, the conservative aggregate asset allocation of Spanish insurance companies cannot be the effect only of Solvency II as such since the same basic regulatory regime applies in all peer countries shown above. However, implementation of regulation may differ between countries. Increasing coherence in the approval of internal models to calculate capital requirements, for example, is an ongoing debate at the EU level to unlock more capital for the real economy (Letta, 2024[58]). Market participants have indicated that the supervisory capacity for approval and development of such models is lagging in Spain compared to other countries. The basic business model and liability structure of an insurance company is naturally premised on very prudent investment strategies, which cannot be compromised for the sake of increased equity market activity alone. However, as peer country experiences show, there is clearly room for asset allocations that are less reliant on government debt and more exposed to corporate equity. Given the significant size of the insurance sector (which in Spain is eight times higher than that of occupational pension funds) relative to the domestic capital markets, even minor shift in asset allocation could have a significant impact.
Note: In Panel C, equity exposure includes indirect exposure through equity investment funds, whereas government bond exposure refers only to direct holdings. Indirect exposures through mixed funds are not included. Source: EIOPA Insurance statistics.
1.5.3. Investment funds
Investment funds have grown significantly around the world over the last two decades. The increase has been particularly marked for debt markets in the wake of the 2008 financial crisis, following regulatory changes that saw credit intermediation move away from the banking sector (OECD, 2024[59]). Spanish investment funds (including mutual funds, SICAVs and ETFs) have also grown, with total assets increasing by 63% since 2008. However, this compares with a much more significant growth of 169% in peer countries (Figure 1.21, Panel A). As with other institutional investor categories, investment funds’ asset allocations are also more conservative in Spain than in most peer countries. Direct holdings of listed and unlisted equities make up 21% of total assets, compared to an average of 39% in peer countries and as much as 68% in Sweden (Panel B). Debt securities are the single largest asset class, representing 47% of total assets, the highest among peer countries after Italy (49%). Equity funds have become more prevalent over time, however, increasing from an average of 10% of total funds by size between 2005 and 2014 to 16% between 2015 and 2023 (Panel C). The share of fixed income funds has remained relatively stable, with the main decrease taking place in “other” category, which includes alternative, commodities, convertibles, property and miscellaneous funds. Allocation (mixed strategies) funds have seen the biggest growth.
Note: Panels A and B refer to non-money market funds. Peer countries in Panel A are France, Germany, Italy, the Netherlands and Sweden. Panel C refers to open-ended funds and ETFs domiciled in Spain. Fund size is calculated in USD based on monthly averages in each year. "Allocation" refers to mixed strategies including equities, fixed income and cash. The “other” category includes alternative, commodities, convertibles, property and miscellaneous funds.
Source: OECD Institutional Investor Statistics; ECB Sector Accounts; Morningstar Direct.
When looking at the number of funds instead of total assets, a different picture emerges. The number of funds domiciled in Spain has in fact decreased by 44% since 2000. This decline began in 2008, but the largest decrease has taken place since 2021, up until which the total number of funds was still 9% higher than in 2000. This compares to an increase of 200% globally (Figure 1.22, Panel A). Reflecting a lack of activity in the domestic market (see section 1.3), Spanish equity funds have seen net outflows in every quarter since Q4-2018 (Panel B).
In Spain, collective investment vehicles are subject to a special tax regime with a tax rate of 1%. To qualify as either a public investment fund or a SICAV (legal entity), a minimum of 100 participants (unit holders in the case of public investment funds and shareholders in the case of SICAVs) is required. This condition was established to ensure that such schemes are not used by individuals as a means to avoid the general corporate tax rate applicable to regular companies. Collective investment vehicles with fewer than 100 participants are subject to the general corporate tax regime (ICGL, 2024[60]). In the case of SICAVs these requirements were tightened following the amendment of Law 11/2021 (applicable from 2022), which required the participation limit to be met for three-quarters of the total days of the taxable year and imposed a minimum investment threshold of EUR 2 500 (EUR 12 500 for umbrella funds) for an investor to count towards the minimum number of participants (Hogan Lovells[61]). These requirements do not apply to collective investment vehicles in peer countries and may have encouraged the relocation of investment funds to other jurisdictions (BME, 2024[7]). There has been a sharp drop in funds domiciled in Spain since 2021 (Figure 1.22).
Note: Panel A refers to open-ended funds and ETFs that are either domiciled in Spain or where Spain is the region of sale. The total number is calculated by summing up the net number of funds (new minus dead) since the start of the data series. Dead funds can be either liquidated or merged into another fund. Panel B shows three-quarter rolling averages for funds categorised as "Spanish equity" by Morningstar and are not limited to funds domiciled in Spain. Excludes money market funds, funds-of-funds and feeder funds. Source: Morningstar Direct.
Notably, the special Spanish tax regime for investment funds does not apply to European Long-Term Investment Funds (ELTIFs), meaning they are subject to regular corporate income tax (Clifford Chance, 2023[62]).3 ELTIF activity in Spain has suffered from a lack of clarity on tax treatment and disadvantageous taxation compared to other investment funds. Meanwhile, some EU countries, such as Belgium and Italy, have provided specific tax benefits for ELTIFs, further contributing to making Spain a relatively less attractive destination. Certain provinces in the Basque Country also apply a favourable tax rate of 1% to ELTIFs (DLA Piper, 2023[63]).
It bears noting that the original ELTIF structure has not been widely used in the EU in general, with funds concentrated in a small number of countries, as the original 2015 regulation that introduced them was seen as overly restrictive on requirements related to distribution and portfolio composition. However, the structure was modified with the introduction of the new “ELTIF 2.0” regulation, applicable from 2024, aimed at increasing the attractiveness of the investment vehicle. The amended regulation relaxes investment restrictions and provides a more tailored distribution process (DLA Piper, 2023[63]). While the outcome of these changes remains uncertain, some studies expect that the growth of the market will pick up, thereby becoming a more important fund segment (Private Equity International, 2024[64]). Equal tax treatment with other funds and greater clarity with respect to the applicable regime would help Spain benefit from those developments.
The tax treatment of exchange-traded funds (ETFs) in Spain also merits discussion. ETFs have seen very strong growth globally in recent years, outpacing the already fast-growing broader investment fund universe and thus representing an increasing share of total funds (OECD, 2024[59]; Oliver Wyman, 2023[65]). Generally lower fees, beneficial tax treatments and greater trading possibilities have made them popular vehicles among investors. In Spain, the Personal Income Tax Law allows for the deferral of capital gains taxes (or the transfer of losses) stemming from the sale of shares or units in certain collective investment vehicles, subject to the funds being reinvested into another eligible vehicle. The tax is only paid when an investor transfers out of eligible funds. This is known as the traspasos regime. The law specifies that transactions in ETF shares are not eligible for this regime (EY, 2021[66]). This initially applied to all ETFs, but in 2016 the Spanish tax authorities issued a ruling that made ETFs listed outside of Spain eligible for the traspasos regime, while ETFs listed in Spain remained ineligible (Cuatrecasas, 2019[67]). This significantly reduced the rationale for listing an ETF in Spain over another jurisdiction and led to a reduction in the already very small number of ETFs listed in Spain (Figure 1.23, Panel A).
The law was amended in 2021, applying a stricter definition that meant no EU ETFs, whether listed in Spain or elsewhere, would be eligible for the traspasos regime from 2022 (EY, 2021[66]). This has made any type of ETF investment a less attractive prospect for Spanish investors, drastically reducing the incentives to list or market an ETF in Spain. The current tax regime means that an investor who wants to change their exposure by shifting from bonds to equities, for example, will need to pay capital gains tax (if applicable) arising from the sale of the bond ETF before making the new investment in an equity ETF. From an investor perspective, this makes an investment in an ETF no different, in terms of tax treatment, from buying the underlying assets directly. Compared to funds that are eligible for the traspasos regime, it puts ETFs at a fiscal disadvantage. Since deferral structures like traspasos are not applicable in comparable EU jurisdictions, this relative tax disadvantage is unique to Spain. The result is that the Spanish ETF landscape is unaligned with the broader European one.
The unequal fiscal treatment of ETFs compared to funds in Spain is rooted in operational complexities. Because ETFs trade on secondary markets, tax authorities lack certainty that intermediaries and management entities can track the necessary historical acquisition information (e.g. original purchase price and identity of the owner), complicating the accurate calculation of capital gains and compliance with tax obligations. In contrast, for traditional funds, intermediaries and management entities are trusted with providing the tax authorities reliable information on transfers, simplifying the calculation of capital gains and the determination of accurate tax liabilities. Recognising these operational difficulties, removing the existing tax imbalance could help foster the growth of ETFs in Spain and offer investors a greater variety of options to invest their savings.
Contrary to Spain, other EU countries have seen strong growth of ETFs. This development has not been restricted to countries that tend to be dominant in fund activity, such as Luxembourg and Ireland, but is widespread (Figure 1.23, Panel B). For example, there are 77 French ISIN ETFs trading on Euronext Paris, out of a total of over 700 ETFs trading on the exchange (Euronext[68]).
Source: OECD calculations based on Morningstar Direct.
The Spanish policy landscape may be hampering the growth of investment fund activity. Removing barriers to the creation of fund structures, notably ETFs, and fostering an environment that promotes cost-efficient vehicles in general could help increase activity in Spanish capital markets, to the benefit of households looking for avenues to invest their savings and of companies in need of financing.
To increase the role of institutional investors in its capital markets, Spain could:
Consider policies to increase the size of the occupational pension fund sector and incentivise occupational pension savings.
Remove the possibility of early withdrawals from pension funds (except for contributions made when this option was stipulated in law).
Review whether the limits on fees that pension funds are allowed to pay for management and depository services unduly restrict their investment opportunities and consider adding a 2% limit for alternative investment funds.
Decouple the limits on contribution amounts from the limits on tax deductible amounts for pension funds, and consider significantly raising or fully eliminating restrictions on contributions.
Increase the tax deductibility limits for personal pension fund contributions, which have been significantly reduced in recent years, at least for savers that are not covered by an occupational pension plan.
Allow tax deductibility limits for pension contributions of self-employed workers to be calculated over several years to account for year-on-year differences in income.
Review whether the implementation of relevant regulations unduly restricts insurance companies’ investment opportunities, notably in equity.
Consider introducing an exception to the minimum number of participants for collective investment vehicles targeted specifically at institutional investors.
Address the current operational complexities that prevent ETF investors from applying the traspasos tax deferral regime and extend the regime to ETF investments regardless of the place of listing of the vehicle.
Consider making the special tax regime for investment funds applicable ELTIFs.
Institutional investors – pension funds, insurance companies and investment funds – are the largest owners on global equity markets and play an important role in providing companies with funding. The Spanish market is characterised by low institutional investor engagement in general and suffers in particular from the lack of a sizeable group of domestic institutional investors. Domestic entities represent only 5% of total institutional investor equity ownership in Spain, compared to 20% in the EU as a whole. In addition, Spanish institutional investors, notably insurance companies, tend to apply very conservative asset allocation strategies. Increasing the size and activity of domestic institutional investors would be one of the most impactful ways of increasing the size of Spanish capital markets. Policy efforts to address this could be considered.
Pension funds are the most undersized institutional investor category in Spain. Pension entitlements amount to more than 500% of GDP, of which less than 1% is funded. Total assets under management by occupational pension funds amount to 2.5% of GDP, with participation by 10% of the labour force. Spanish authorities should consider policies to increase participation in asset-backed occupational pension funds. In addition to providing a complement to the core Pillar I pension system, achieving this would significantly expand the capital available in Spanish capital markets. With the same goal of increasing pension fund activity, unlimited early withdrawals from pension plans that are set to be available from 2025 could be removed. However, contributions made from 2015 until this change is implemented should retain the option of early withdrawal after 10 years, since they have been made under the assumption of this possibility. A review could also be undertaken to evaluate whether the limit on management fee payments applicable to occupational pension funds unduly restricts their universe of investable assets, to the detriment of participants. Specifically, an additional category could be introduced for investments in alternative investment funds (such as private equity, infrastructure credit funds, etc.), with a cap set at 2%.
A key factor limiting the growth of private pension funds in Spain is the restriction on both tax deductibility and contribution amounts for individual pension funds. These two limits (regulated in Law 35/2006) are tied, meaning that the same cap applies to both, currently set at EUR 1 500 annually. Decoupling these limits would allow for a significant increase in or complete removal of restrictions on contributions, helping increase the size of the third pillar pension system, while maintaining limited fiscal deductibility. By forcing savers to use several different vehicles, maintaining a limit on contributions serves to add a layer of complexity to personal pension savings, which should be as simple as possible to incentivise further saving. Finally, given the negative impact that the reduction in the amount of tax-deductible personal pension plan contributions, from EUR 8 000 to EUR 1 500 in 2022, is likely to have on the size and growth of personal retirement savings, an evaluation should be undertaken to assess whether the limit should be increased again, at least for people who are not part of an occupational pension scheme. Finally, for self-employed workers, whose income often fluctuates over time, the annual limits on tax deductible contributions could be replaced with multi-year limits. For example, maximum tax-deductible contributions could be calculated over a period of three years rather than annually, providing entrepreneurs greater flexibility to smooth year-on-year differences in income.
Spanish insurance companies’ asset allocation strategies are very conservative when compared internationally. Government debt makes up almost half of total assets, nearly three times the peer country average, and equity exposure is no more than 13%, less than half of peer countries. Given that the same broad regulatory framework applies in all peer countries, Spanish authorities should conduct a review to understand why this is the case and whether their application of the relevant regulations is overly stringent. The supervisory treatment of internal models for capital requirements should be one area of analysis. This review would benefit from international dialogue with other competent authorities as well as with large insurance companies.
For investment funds, the requirement of a minimum of 100 participants, and a minimum investment amount to count towards that number, to classify as a public investment fund could be lifted conditional on such funds being limited to institutional investors. That would facilitate the creation of specialised funds that may not always reach the required number of participants, without compromising on restrictions in place to combat tax evasion. In addition, it would give greater certainty with respect to tax treatment and incentivise the creation of investment funds, a sector that is lagging significantly in Spain compared to other countries. Similarly, ETF activity, which has seen very strong growth globally in recent years, is very limited in Spain. This is partly an effect of policy design and operational complexities with respect to taxation. Specifically, the fact that investors in ETFs are not eligible for the tax deferral (traspasos) regime applicable to other collective investment vehicles creates a tax imbalance, with negative effects on the development of the ETF market. This stems from operational challenges in obtaining the necessary information for the tax authorities to accurately calculate tax obligations. To promote the creation of Spanish ETFs and offer savers a greater variety of products, Spanish authorities should endeavour to address these operational challenges together with market infrastructure providers in order to make the traspasos regime applicable to ETFs, regardless of their country of listing. Finally, benefitting from recent EU-level developments with respect to the ELTIF framework, the special tax regime for investment funds (1% taxation as opposed to general corporate taxation) could also apply to ELTIFs in Spain.
Household savings are a key domestic source of funds for financing capital investments, which are crucial for long-term economic growth (OECD, 2016[69]). Channelling these funds into capital markets expands businesses’ ability to invest in productive activities. Additionally, household participation in capital markets can help increase liquidity. Various factors influence the level of household savings in a country, including macroeconomic conditions, regulatory frameworks, as well as demographic and socioeconomic elements. In Spain, one of the main challenges to the expansion of domestic capital markets is the low allocation of household savings to these markets. This also affects individuals’ pensions and the capital available for retirement. It is therefore essential not only to promote policies and initiatives that encourage higher savings rates but also to incentivise retail participation in capital markets to support households’ future financial well-being, with the additional benefit of promoting capital market development more broadly.
In 2023, Spain had one of the lowest gross household savings rates among its peers, standing at 11.7%. Although a comparison with the level from a decade earlier (7.9%) highlights that there has been a modest positive evolution in Spanish household savings, the savings rate still lags behind peer countries. In 2023, Germany, the Netherlands, France and Sweden exhibited much higher figures ranging between 17.1% and 20.3% (Figure 1.24, Panel A). It should be noted, however, that the low level of savings in Spain is partly influenced by the level of disposable income, which also lags behind that of other European countries. This factor significantly hampers Spanish households’ ability to save, as a substantial portion of their income is needed to cover essential expenses. For instance, in 2022 gross disposable income per capita in Spain was PPS4 21 382 while for the other countries analysed it ranged between PPS 25 214 (Italy) and 32 086 (Germany) (Figure 1.24, Panel B).
Note: In Panel A, the gross savings rate of households refers to the gross savings divided by gross disposable income with the latter being adjusted for the change in the net equity of households in pension funds reserves. For 2023, the gross savings rate is calculated as an average of quarterly savings rates. For France the average excludes Q4 2023 due to data unavailability. Panel B shows the adjusted gross disposable income of households per capita in PPS (purchasing power standards) which is calculated as the adjusted gross disposable income of households and non-profit institutions serving households divided by the purchasing power parities (PPP) of the actual individual consumption of households and by the total resident population.
Source: Eurostat.
Spanish household wealth is highly concentrated in real estate. In 2023, real estate assets were nearly three times higher as a share of disposable income (666%) compared to financial wealth (226%) (Figure 1.25, Panel A). The gap has narrowed since the 2008 financial crisis, partly driven by price corrections in real estate prices, but remains significant. It should be noted that this wealth is unevenly distributed across income levels, with the top 10% of households holding one-third of all real estate assets (Cobreros, García-Uribe and Gómez-García, 2023[70]).
On the liabilities side, Spain ranks among the countries with the highest share of households with mortgage debt (35%), second only to the Netherlands (47%), according to the ECB's Household Finance and Consumption Survey (Figure 1.25, Panel B). The wealthiest 10% of households owe 11.4% of total real estate debt, implying, as would be expected, that they are less indebted relative to their real estate wealth than lower income groups. Notably, Spain also has the highest proportion of households where mortgage debt is tied to a property other than the primary residence, possibly indicating a stronger preference for real estate as a financial investment compared to other countries.
The preference for real estate over financial assets can be partly attributed to the tax incentives tied to home ownership. For instance, although the 15% tax deduction on the amount contributed to the purchase of primary residences was removed in 2013, other tax-deductible expenses related to the acquisition of a main residence still exist. These include expenditure such as the mortgage interest, repair and maintenance costs, and fees for services provided by third parties (Law 35/2006[48]). For properties intended for residential rentals, owners can also benefit from additional deductions, which range from 50% to 90% of the net rental income, depending on various factors.
Note: In Panel B, data for Sweden are not available.
Source: Bank of Spain, ECB HFCS Survey (2023[71]).
Spain has one of the lowest levels of financial assets as a share of GDP among peer countries. Nevertheless, like other European countries, it has seen an increase in this metric over time. Spanish households’ financial assets amounted to an average of 163% of GDP between 2000 and 2011, rising to 200% in the subsequent 12-year period. However, this positive evolution has been weaker compared to countries with a tradition of household engagement in capital markets, like Sweden, where household financial assets increased from 193% of GDP during the 2000-11 period to 294% between 2012 and 2023. (Figure 1.26, Panel A). An important aspect of this trend is the composition of households’ financial assets. At the end of 2023, Spain ranked second, after Germany, in the share of funds held in currency and deposits, which accounted for almost 40% of the total. This highlights the potential for channelling more funds into savings vehicles that could provide households with higher returns and boost domestic capital markets. While a significant portion (30%) of Spanish households’ funds is allocated to equities – the second highest among peer countries after Sweden – only 4.5% corresponds to listed shares (Figure 1.26, Panel B). Reflecting the underdevelopment of the Spanish asset-backed pension fund sector, only 13% of households' total financial assets are made up of insurance, pensions and standardised guarantees in Spain, the lowest proportion among the economies analysed (see section 1.5.1).
Note: Data for the Netherlands not available prior to 2012. Households’ financial assets do not include real estate.
Source: Eurostat.
The substantial proportion of household funds allocated to equities is primarily driven by a small group of individuals. This is observed in the Bank of Spain’s Survey of Financial Competences, which details the percentage of individuals holding various saving vehicles. The survey shows that Spanish adults (aged 18 to 79) make very limited use of these vehicles. Only 41% of the population have money invested in any kind of saving vehicle. The most common options are pension schemes and savings accounts, held by 21% and 18% of individuals, respectively. Holdings in company shares (14%) and investment funds (12%) are even less common. The least popular saving options are cryptocurrencies and fixed income (Figure 1.27). Investment tends to increase with age. For instance, while 29% of adults between the age of 18 and 34 have money in some form of savings vehicle, this percentage rises to 49% for individuals aged between 55 and 64. The only exception to this trend is cryptocurrencies, where the youngest age group has the highest representation.
Source: Bank of Spain (2021[34]), Survey of Financial Competences.
Various investment products have been developed to promote long-term savings in Spain. For instance, Law 26/2014 introduced the Plan de Ahorro a Largo Plazo (PALP) as an alternative to traditional savings accounts, offering potentially higher returns. PALPs provide tax benefits if investors commit to a minimum investment period of five years, with maximum annual contributions capped at EUR 5 000. There are two main types of saving plans within PALP: the Cuenta Individual de Ahorro a Largo Plazo (CIALP), which is set up through a bank account, and the Seguro Individual de Ahorro a Largo Plazo (SIALP), set up through an insurance policy. The firm managing these products, whether an insurance company or a banking entity, decides on the types of assets in which to invest the capital, including both fixed and variable income investments. If the conditions concerning minimum investment period and maximum investment amount are met, PALPs provide a tax advantage where the income generated is exempt from personal income tax. Additionally, at least 85% of the invested capital is guaranteed at the end of the investment period. An important difference between the two products is that the CIALP requires the repayment of the capital at the end of five years, while the SIALP allows the reinvestment of the principal and the interest into a new individual insurance policy. According to UNESPA (2024[72]), approximately 350 000 individuals held SIALPs at the end of 2023, with total technical provisions amounting to EUR 3.8 billion.
Another investment product available in Spain is the Plan Individual de Ahorro Sistemático (PIAS), a long‑term savings plan designed to promote systematic saving with the option of obtaining an annuity that offers tax benefits under certain conditions. The maximum annual contribution is EUR 8 000, and the total limit over the life of the contract is EUR 240 000. Contributions are invested in a diversified portfolio managed by the insurance company. After a minimum period of at least five years from the first contribution, the holder can choose to convert the accumulated capital into a lifetime annuity. Notably, the primary tax advantage of this product is the reduction in the capital gains amount subject to taxation, which increases with the recipient’s age, up to a 92% reduction for individuals aged 70 or above (AEAT[73]). By the end of 2023, over 1.5 million individuals held PIAS policies, with total technical provisions amounting to EUR 15 billion (UNESPA, 2024[72]).
An option that has gained popularity in recent years is the Unit-Linked Insurance Plan. This is a savings and investment insurance policy linked to a basket of funds, where the insured assumes the investment risk. It is structured around a life insurance policy, with part of the investment going towards the premium, providing coverage in case of death. However, most of the capital contributed is allocated to investments. The manager invests this capital in a predefined basket of assets based on the preferences of the policyholder. This product follows the tax regime for life insurance under personal income tax, with deferred taxation until the date of redemption (AEAT[74]). Unit-linked insurance plans grew significantly from 2022 to 2023 in terms of total AUM, reaching EUR 26.6 billion, with a total of 1.4 million policyholders (UNESPA, 2024[72]).
There are other savings products designed exclusively for retirement, such as individual pension plans and the Planes de Previsión Asegurados (PPAs), which are linked to a life insurance policy (AEAT[75]). PPAs were held by approximately 810 000 individuals with technical provisions amounting to more than EUR 10 billion as of end 2023 (UNESPA, 2024[72]). Both PPAs and individual pension plans offer tax benefits. Specifically, contributions up to EUR 1 500 are deductible from taxable income. This limit, however, has been subject to significant changes over recent years: previously set at EUR 8 000 until 2020, it was subsequently reduced to EUR 2 000 and, under Law 31/2022, further decreased to EUR 1 500. The main difference between PPAs and individual pension plans is that PPAs guarantee a minimum return on the contributions made.
Other countries have also implemented policies to encourage people to save. Sweden, for instance, has an investment savings account with a simplified (and possibly beneficial) tax treatment, for which a range of securities are eligible.5 No capital gains tax is charged at the point of sale; an annual tax is instead levied based on the total asset base, regardless of whether there have been capital gains or losses during the fiscal year. The tax is set based on the government’s borrowing cost plus a fixed rate of one percentage point and cannot be lower than 1.25%. The government has proposed a tax-free allowance on savings in these and other accounts of SEK 150 000 (c. EUR 13 000) from 2025, increasing to SEK 300 000 (c. EUR 26 000) from 2026 (Swedish Tax Agency, 2024[76]). The asset base for taxation of each individual account is submitted to the tax authorities directly by the broker, meaning individuals do not need to do anything other than confirm the pre-filled amount at the time of declaration. This has helped improve the efficiency of the tax system – a review by the Swedish Tax Agency based on data five to seven years before the implementation of the investment savings account found that more than half of individuals selling shares misreported figures in their tax declaration (Swedish National Audit Office, 2018[77]). It also provides a level of certainty to savers: given that no capital gains taxes are paid at the time of sale, the balance available in the account will broadly reflect the amount available to them if they were to liquidate their holdings. Similarly, in France, the Plan d'Epargne en Actions (PEA) is a stock savings plan for investments in a portfolio of European company shares. This plan offers tax exemptions on earnings provided that no withdrawals are made for at least five years, with a maximum contribution limit of EUR 150 000. Additionally, there is the PEA-PME, which aims to channel household savings into small and medium-sized enterprises, and the PEA Jeune, designed for young adults with a lower payment ceiling of EUR 20 000 (Ministère de l'Économie et des Finances[78]).
Notably, these models focus more on direct individual investment, rather than the purchase of an investment product managed by an insurance company, for example. Regarding pension schemes, in countries like Germany with the Riester pension plans (Deutsche Rentenversicherung[79]), and the United Kingdom with the Lifetime ISA (UK Government[80]), the state provides saving incentives by complementing the individuals’ private contributions with different annual allowances and bonuses.
Financial literacy can have a significant impact on households’ budget allocations, including decisions related to savings (Jappelli and Padula, 2013[81]). Individuals with higher levels of financial literacy have a higher propensity to participate in the stock market and plan for retirement (van Rooij, Lusardi and Alessie, 2012[82]). The OECD/INFE have conducted a survey aimed at quantifying adult financial literacy levels across countries. The survey results are used to construct an index encompassing financial knowledge, behaviour and attitudes. The index shows that Spain’s overall financial literacy level is comparable to other European countries, with a score of 64 out of 100, although it still lags countries such as Sweden, Germany and the Netherlands. Notably, when examining financial behaviour, which refers to individuals’ practices related to their finances such as spending, saving and investing, Spain ranks second to last among the countries included in the present analysis with a score of 26.8 out of 45 (Figure 1.28, Panel A). In terms of financial knowledge, the results of the survey indicate that while Spanish individuals correctly understand concepts like inflation, loan interest and risk and return, a much more limited share correctly understands simple and compound interest (22%) or the concept of risk diversification (52%) (OECD, 2023[83]). Moreover, only 39% of individuals surveyed achieve the minimum target of financial literacy set by the OECD which corresponds to a score of 70 out of 100 (Figure 1.28, Panel B).
Note: The results for Spain are drawn from samples obtained in 2021 using the OECD (2018[84]) Toolkit for measuring financial literacy and financial inclusion. For the rest of the countries results are drawn from samples using the 2022 Toolkit. Panel B shows the percentage of adults who scored 70 points or more (out of 100) on financial literacy.
Source: OECD/INFE (2023[83]) International Survey of Adult Financial Literacy.
Financial literacy among young people also merits attention. This segment of the population represents the financial future of the country and will soon make financial decisions affecting not only their own well‑being, but also that of society as a whole. A recent OECD PISA report (2024[85]) assessed the financial knowledge of 15-year-olds across 20 jurisdictions. The results indicate that financial literacy levels among young people in Spain are somewhat below the OECD average (Figure 1.29). Over 17% of Spanish students performed poorly in the tests conducted for the report, indicating a very limited understanding of financial concepts, negatively affecting their financial behaviours and attitudes. The need for improved financial education for young people is a widespread concern across the Spanish population. A recent survey targeting parents of high-school students showed that 90% of the respondents think that topics related to financial knowledge and money management should receive greater emphasis in the compulsory education curriculum (Funcas, 2024[86]). These findings suggest that there is substantial potential to enhance financial education in Spain, which, among other benefits, could positively impact household savings.
Note: “FC” refers to “Flemish community”. The country scores are set in relation to the variation in results observed across all test participants (i.e. the results are escalated to fit approximately a normal distribution). In the assessment five levels of proficiency are identified. Low performers are those below level 2 while top performers are those in level 5. Results from Denmark, Canadian provinces, the Netherlands and the United States should be interpreted with caution because one or more PISA sampling standards were not met.
Source: PISA 2022 (Volume IV) (2024[85]).
In recent years, important steps have been taken in this direction. In 2008 a financial education plan (Plan de Educación Financiera) based on OECD principles and recommendations was launched, promoted by the CNMV, the Bank of Spain and the Ministry of Economy, Trade and Business. This programme aims to improve the financial culture of citizens, providing them with the basic knowledge and tools necessary to manage their finances in a responsible and informed manner (Finanzas para todos[87]). The programme is supported by a strong network of public and private entities that collaborate in developing actions within the financial education plan framework. Some of the initiatives include developing comprehensive educational materials, such as guides and videos, to simplify financial concepts for the general public. The programme also organises workshops, conferences and seminars across Spain and collaborates with the education sector to enhance financial education in schools. For instance, although it is not a standalone subject, financial topics have been integrated into various subjects at both the primary and secondary levels. Moreover, this plan promotes a financial knowledge competition for high school students, consisting of multiple-choice questions on economic and financial topics, with various prizes awarded to the winners.
To promote household savings and incentivise capital market participation, Spain could:
Create an individual savings account with flexible investment options and simplified taxation.
Continue simplifying general capital gains tax declaration procedures and improve taxpayer assistance.
Promote financial education campaigns informing about the benefits of participating in capital markets.
Implement measures to improve financial education for young people and continue to evaluate the outcomes of these initiatives by participating in future PISA assessments.
Household saving rates in Spain are low, an effect not only of limited income levels but also of the lack of attractive available savings options, a need for enhanced financial literacy and obstacles in declaring capital gains. Policy proposals to address these issues are outlined below.
An impactful measure to improve this situation would be to create an individual savings account that incentivises household investment in capital markets. To be successful, such an account should have two key characteristics: freedom of asset allocation and simplified taxation. Firstly, in terms of asset allocation, following the example of other European countries (such as Sweden), the account structure should allow individuals to decide freely on their asset allocation rather than rely on pre-packaged investment products offered by banks or insurance companies. There should ideally be autonomy both with respect to asset classes and geographic location of the investments. This flexibility would enable individuals to tailor their investment strategies to their personal circumstances, preferences and risk tolerance. This would allow for a higher-return profile than currently offered by existing saving products – a factor that might explain the low levels of holdings for saving products like PALPs, even when offering tax exemptions on capital gains, is their low profitability and existing limitations (Instituto de Estudios Económicos, 2022[88]).
Secondly, the tax declaration process for investments through this account should be simple and straightforward. The popularity of retail savings accounts does not depend only on fiscal incentives, but also on the simplicity of taxation. The widely popular Swedish investment savings account, for example, does not unequivocally offer tax benefits compared to other accounts (although fiscal incentives have been proposed from 2025), but the tax design means there is no capital gains tax at the point of sale. Instead, an annual tax is levied based on the total asset base regardless of whether there have been capital gains or losses during the fiscal year. Simplified taxation does not necessarily imply tax benefits. However, fiscal incentives would significantly help increase take-up and could be associated with the account if deemed appropriate.
The creation of an individual savings account along these lines in Spain could help significantly boost household participation in capital markets. This could help increase households’ financial wealth and reduce the current concentration of savings in real estate. In addition, because retail participation tends to add liquidity to a market, this could also contribute to improving the reduction in liquidity in Spanish equities seen in recent years, the main challenge noted by listed companies in the OECD survey (Abudy, 2020[89]), see also sections 1.3.2 and 3.5).
Spanish authorities could also strive to streamline the capital gains declaration process more broadly. Complex tax declarations can discourage individuals from using savings options owing to difficulties in understanding the taxation applicable to different saving vehicles. In Spain, taxpayers are responsible for calculating and reporting their tax obligations, which requires familiarity with and understanding of the tax system. This is especially relevant given the complexity of the Spanish tax system, with numerous rules and potential deductions that can vary substantially between regions. In 2022 almost 60% of citizens relied on external assistance to complete their tax declarations, with half paying for this help (IEF, 2023[90]). While Spain has already made several improvements in terms of simplification (including online tools providing pre-filled forms and virtual assistance), resulting in more individuals autonomously completing their tax declarations in recent years, further efforts are necessary.
For example, capital gains data included in the pre-filled tax forms of the personal income tax declaration (IRPF) requires a thorough review to ensure that all income sources are included, and all possible deductions are applied. This is particularly important for taxpayers with income from financial instruments like shares, as such information is typically not included in the pre-filled forms, and the process of declaring capital gains becomes more complex the longer these assets are held. Simplifying the capital gains tax declaration process for taxpayers and ensuring it includes all relevant information on savings accounts, investment funds, retirement accounts and other savings vehicles, along with its relevant tax credits and deductions (including those at the regional level), could incentivise households to invest in securities with a better risk-return profile. In addition, considering the complexity of the Spanish tax system, it is essential to continue improving direct assistance channels for taxpayers. Allocating additional resources to enhance existing online, telephone and in‑person support services could make declaring capital gains less burdensome. Implementing a feedback mechanism for taxpayers could also help identify common challenges faced by individuals and facilitate continuous improvement of such services.
Finally, although Spain’s existing financial education plan has significantly contributed to increasing financial literacy levels across different demographics, further efforts are needed to deepen the public’s understanding of the importance of savings for financial well-being and retirement. Raising awareness about available products, such as savings accounts and individual pension plans, could encourage their use. To achieve this, a collaborative promotional campaign with the participation of the government and financial institutions, such as banks and insurance companies, could be implemented to inform about the benefits of actively participating in the country’s capital markets and promote the advantages of existing savings options. Moreover, specific measures targeting the younger segments of the population should be implemented. This could include further enhancing primary and secondary school curriculums to prioritise the development of financial knowledge, skills, behaviours and attitudes. Assessing the overall effectiveness of these initiatives is essential to ensure they are being implemented appropriately and to identify specific needs that must be addressed. Therefore, Spain should continue conducting national financial literacy surveys as part of future PISA assessments, as it has consistently done in the past.
The Spanish corporate bond market is dominated by a few large players. Smaller corporations face significant barriers to issuing debt securities and domestic investor demand remains weak, with institutional investors playing a very limited role. In the OECD survey of Spanish companies less than 30% of respondents identified debt securities as an important source of financing (Figure 3.5). Implementing measures to encourage the use of corporate bonds, in particular by non‑financial companies, and boosting investor demand for these instruments are crucial to provide alternative financing sources to corporations and to the development of a well-functioning domestic capital market.
The market is currently dominated by financial companies. After a limited increase in the share of non‑financial company issuance between 2008 and 2020, in line with global trends, the share has decreased sharply since 2020. By 2023, non-financial companies accounted for only 9% of total issuance, the lowest level since 2007 and significantly lower than the EU-wide figure (Figure 1.30, Panel A). The Spanish market is also more dominated by financial companies than those in peer countries (Panel B). Between 2000 and 2007, non-financial corporate participation accounted for only 7% of total amounts issued, significantly lower than the Netherlands (39%), France (29%) and Italy (21%). The share has since increased, notably during the 2008-15 period, narrowing the gap with most peer countries. However, at 23% in the period between 2016-23, it remains the second-most financial company-intensive market after Sweden.
Source: OECD Capital Market Series dataset; see Annex A for details.
The composition of non-financial companies’ debt financing shows a substantial increase in the share of debt securities in Spain over the past two decades. However, bank loans remain by far the most dominant funding type, more so than in most peer countries (Figure 1.31, Panel A). At the end of 2023, 90% of debt financing for Spanish companies was in the form of bank loans (83% in the form of long-term loans) (Figure 1.31, Panel B).
Note: Panel A shows the share of debt securities (long and short-term) in total debt financing (the sum of total loans and total debt securities) for non-financial companies. Securities with original maturities below one year are classified as short-term.
Source: ECB.
The increase in the use of corporate bonds by non-financial companies over time is partly driven by more entrants to the market. During the 2000-2011 period, the average number of issuers was just 7 (Figure 1.32, Panel A). This figure more than doubled during the following 12-year period, reaching an average of 16 between 2012 and 2023. New issuers accounted for 38% of the total number of issues on average between 2000 and 2011, rising to 48% between 2012 and 2023. The upward trend was most notable between 2007 and 2017, peaking at 23 issuers in 2017. This increase can be partly attributed to more companies seeking to take advantage of low market rates to secure relatively cheap financing after the 2008 financial crisis and consequent regulatory measures that incentivised bond financing over bank loans. However, a market with an average of 16 issuers remains very concentrated and inaccessible to most companies. Moreover, in recent years, the increasing trend has reversed. In 2023 there were only 8 issuers, the lowest number since 2012.
The dominance of large companies can be seen in the distribution of issue sizes. From 2000 to 2023, an average of 67% of issues (by number) were greater than EUR 250 million. This large size bracket has only accounted for less than half of all issues in two years, 2002 and 2008. In 2023, for the first time, all issues were larger than EUR 250 million (Figure 1.32, Panel B).
Note: In Panel A, a company is defined as a first-time issuer if the bond is its first issue since the start of the data series (January 1980). A “returning issuer” is a company which made its last bond issue more than five years ago. If the company issued bonds in at least one of the past five years, it is defined as an “active issuer”.
Source: OECD Capital Market Series dataset; see Annex A for details.
Some countries have created frameworks specifically designed to incentivise bond issues by smaller companies. One such example is the Italian mini-bond framework established in 2012. Mini-bonds are medium- to long-term bond issues with a total value of less than EUR 50 million, intended for unlisted companies. This framework allows unlisted SMEs to issue bonds with less stringent requirements, without a credit rating and with a less costly issuance process compared to traditional bonds. For instance, mini‑bonds traded on the MTF Euronext Access Milan (formerly Extra Mot Pro), a market targeted to professional investors, do not require prior approval by the financial market supervisory authority, significantly shortening the issuance process. The framework has been successfully adopted by many firms in Italy. Between 2013 and 2023, 1 158 firms issued a total of 1 679 mini-bonds, collectively raising EUR 10 billion, with EUR 4.3 billion issued by SMEs (Politecnico di Milano, 2024[91]). There are indications that mini-bonds have also enabled firms to improve their credit conditions with banks after issuance, attributed to the increased bargaining power of the issuing firms and the release of new public information about them (Ongena et al., 2021[92]). A series of interviews with issuers indicate that the primary benefits of mini-bonds include acquiring skills and knowledge for capital market interactions, enhanced contractual power with banks, more diversified medium- to long-term financing sources, increased visibility and credibility with clients and suppliers, and access to a community of institutional investors and other issuers which can serve as a preparatory step for more complex operations, such as listing on the stock market (Osservatori Entrepreneurship Finance & Innovation, 2024[93]).
Since most mini-bonds are unrated, higher investor protection can in some cases be achieved through insolvency guarantees. These guarantees are often provided by public entities such as the state, regional authorities or organisations aimed at facilitating SME access to credit. For instance, Il Fondo di Garanzia per le piccole e medie imprese, which is managed by a temporary consortium of companies, supports SME credit access using public, state and European resources. This fund also participates in the mini-bond market, though in this case, the guarantee must be requested by the investor. By December 2023, the fund had approved 262 requests for direct guarantees of mini-bonds and promissory notes, covering over EUR 242 million (on an issuance value of approximately EUR 343 million) and benefiting 178 companies.
The feasibility for smaller companies to issue bonds may also depend on the availability of securitised products – and thus the ability of banks to securitise loans – which can help improve SME access to capital markets by increasing investor appeal for bonds that may have little demand individually but are attractive as part of a combined product. Securitisation can also help distribute risk among market participants.
Because of the dominance of a few large companies in the Spanish market, most issues have a credit rating. Issuers lacking the necessary resources to obtain a credit rating may be discouraged from entering the bond market because of institutional investors’ preference for rated bonds. Spain ranks second among its peers in the share of rated bonds in total issuance between 2000 and 2003, comprising 96% of total issuance by amount and 79% by number, highlighting that it is primarily the largest issuers who make use of credit rating agencies (Figure 1.33, Panels A and B). Among the rated bonds, the majority are investment grade, accounting for 84% of the total amount issued and 63% by number of bonds. The share of unrated bonds over time follows the trends in new entrants and issue sizes, reflecting the lower use of credit ratings among smaller issues (Panel C).
Source: OECD Capital Market Series dataset; see Annex A for details.
In the OECD survey of Spanish companies, only 26% of respondents reported having issued debt securities, and 25% indicated having obtained a credit rating (see chapter 3, Figure 3.20 and Figure 3.21). These figures confirm that while a limited number of companies engage in the bond market, those that do typically have a credit rating. Moreover, among the companies that stated having a credit rating, 62% received it from an international rating agency, while the remaining obtained it from a domestic agency. There are three credit rating agencies in Spain registered with the European Securities and Markets Authority (ESMA). One of them, Moody's Investors Service España, is a subsidiary of Moody’s, one of the three major international credit rating agencies. The other two, Ethifinance Ratings and Inbonis, are much smaller, domestic agencies (ESMA, 2023[94]). Among peers, only Germany and Italy have a higher number of registered credit agencies (Figure 1.34).
Government authorities in Spain have already recognised the need to improve access to credit ratings, particularly for SMEs. In the context of progressing towards the European Capital Markets Union, they have proposed establishing a pan-European credit rating system, allowing interested countries to collaborate on the initiative even if there is no unanimity among EU members (Jopson and Tamma, 2024[95]). Some countries provide ratings nationally through official bodies at reduced costs in an effort to increase accessibility, such as the FIBEN (Fichier bancaire des entreprises) system in France, through which the French central bank provides a form of credit score on individual firms (OECD, 2024[96]). Specifically, FIBEN is a database managed by the Bank of France that centralises information about non-financial companies in France. Companies are assigned a rating consisting of two components: the activity rating, which is based on the latest known revenue, and the credit rating, which reflects the company’s financial condition and its ability to meet obligations over the next three years. Companies receive their ratings free of charge and can request a personal meeting for explanations regarding the rating. Access to FIBEN information is available to various entities, including other central banks, tax authorities, credit and payment institutions, insurance companies, retirement funds, portfolio management companies, and public services involved in economic activities (Banque de France, 2022[97]).
Source: ESMA (2023[94]).
Another factor that is likely to disincentivise the use of corporate bonds is if the issuance process is overly lengthy and inflexible. During OECD consultations for this review, some market participants raised concerns in this respect, notably that issuing a bond in Spain can be more challenging compared to other countries. Specifically, certain participants perceive the CNMV review process as varying more between issues, i.e. being less institutional in character, than in other EU countries dominant in debt listings, such as Ireland and Luxembourg. This can make the issuance process less predictable. In terms of timeliness, the CNMV has reviewed over 99% of all fixed income issues for wholesale investors in the last three years within the agreed timeframe, indicating that the authority is well-equipped to deal with the current level of activity (CNMV, 2023[27]).6
Nearly two-thirds (65%) of the total value of outstanding Spanish non-financial corporate bonds is held by foreign investors (Figure 1.35, Panel A). Domestically, ownership is mainly concentrated among monetary financial institutions (MFIs), which includes deposit-taking corporations such as banks, the central bank and money market funds. By the end of 2023, MFIs accounted for 67% of the total domestic ownership, a significantly higher proportion than in the other countries analysed where MFIs ownership of domestic corporate bonds remains below 50% (see chapter 5, Figure 5.5). Conversely, institutional investors such as insurance companies and pension funds, as well as households hold considerably lower shares in Spain than in most of its peers (Figure 1.35, Panel B).
Note: The “Other” category includes MFIs (monetary financial institutions), general government, other financial institutions and non-financial corporations. Refer to Figure 5.5 for the full distribution.
Source: ECB.
As noted in section 1.5, the institutional investor sector in Spain is both small in size and conservative in its asset allocation. These characteristics directly affect their holdings of non-financial corporate bonds. For instance, the conservative profile is visible in insurance companies’ holdings: 49% of their investment assets are allocated directly to sovereign bonds, more than twice what they allocate to corporate bonds (including both financial and non-financial company bonds) as shown in Figure 1.20. Occupational pension funds allocate only 11% of their direct investments to corporate bonds, which, although higher than their allocation to equity, is still low compared to peer countries (Figure 1.18).
To incentivise the use of corporate debt securities, Spain could:
Consider establishing a dedicated framework for bond issues by smaller companies.
Implement measures to support smaller companies in obtaining a credit rating.
Undertake a review to improve the corporate bond issuance process, notably with respect to regulatory matters such as the institutional structure of the issuer document review process.
The Spanish corporate bond market is primarily dominated by financial companies. Despite a notable increase in participation by non-financial companies since the 2008 financial crisis, their share in the market and overall use of bonds remains limited. Spanish non-financial companies are instead heavily reliant on bank loans. The corporate bond market is highly concentrated among a few large corporations and smaller issuers encounter significant challenges in accessing the market. To incentivise the use of corporate debt securities, Spanish authorities could consider the policy measures outlined below.
To further enhance the use of capital markets by Spanish SMEs and increase institutional investor participation, Spanish authorities could consider establishing a dedicated framework for bond issues by smaller companies, such as the mini-bond framework implemented in Italy. These instruments, which would have capped issue amounts, could be listed on the MARF, thereby targeting professional investors and exempting them from the obligation to publish a prospectus, significantly reducing the burden faced by companies when issuing debt securities. If deemed appropriate, financial benefits (along the lines of the Italian framework) could also be attached to issues under this system. Such a framework would make it easier and more affordable for smaller companies to access market-based financing. This approach could also help companies familiarise themselves with capital market dynamics and allow them to build a valuable network of investors and other market participants, potentially encouraging future market participation, such as listing on the stock exchange.
In the OECD survey conducted for this review, the second most cited reason for not issuing debt securities was the high associated costs (Figure 3.23). One such cost – which can be prohibitive for smaller companies – is that of obtaining a credit rating. Exploring ways of reducing the cost of ratings, whether by subsidies or by providing them nationally through official bodies could encourage more companies to participate in the corporate bond market. For instance, the Bank of Spain could assess the possibility of implementing a framework similar to the Bank of France’s FIBEN system and provide credit scores to non‑financial companies lacking access to regular credit ratings. This information could be shared directly with potential investors, possibly for a fee.
The Spanish government could also consider undertaking a review to address concerns raised by market participants regarding the predictability of the bond issuance process (for base prospectuses and programmes, which are handled by the CNMV). Specifically, stakeholder consultations indicate concerns related primarily to a lack of institutionalisation in the review process. One cited example of this is a perceived lack of clarity and significant variation (with respect to, for example, the number of comments or the level of detail required) depending on the official in charge of each project. An ad hoc advisory committee composed of industry representatives and experts could be established, possibly within the structure of the existing CNMV advisory committee. This group would focus on identifying current inefficiencies. More broadly, it could propose legal and regulatory reforms to improve the efficiency of the domestic bond issuance process in terms of requirements and costs.
Spain is already seeing the impacts of climate change, with more severe effects expected in the future. The Declaration of Climate and Environmental Emergency, which was approved in 2020, states that “climate change directly or indirectly affects a wide range of economic sectors and all ecological systems in Spain, accelerating the deterioration of resources essential for well-being, such as water, fertile soil, and biodiversity, and threatening the quality of life and health of people” (Gobierno de España, 2020[98]). There is broad consensus that the corporate sector will need to play a vital role in financing climate change mitigation and adaptation. Sustainable financing instruments, if properly designed, can serve as a vehicle to channel funds towards key sectors to reduce greenhouse gas (GHG) emissions and support other projects aimed at promoting sustainable economic growth. In recent years, these instruments have seen a surge in popularity globally, and Spain has a strong position in the market (CBI, 2024[99]). However, there is still potential for increased adoption of such instruments by Spanish companies, which will need to make further efforts to build resilience against climate-related risks and align corporate strategies with sustainable objectives.
The corporate sector faces significant risks associated with the climate transition, which can be categorised into two main types: physical risks, related to the tangible impacts of climate change (e.g. floods, storms, or long-term shifts in climate patterns), and transition risks, which arise during the process of adaptation to a low-carbon economy. They include legal, technological, market and reputational risks. All these risks can have substantial financial implications for companies, making their effective management crucial for building a resilient corporate sector in Spain.
Survey results show that 80% of Spanish companies believe that physical climate change risks will somehow impact them. However, only 31% have taken actions such as developing strategies to adapt to risks, making investments to reduce exposure, or purchasing targeted insurance products to protect themselves against the impacts (Figure 1.36, Panel A). Spain is both the country where the highest share of companies consider that physical climate change risks will impact them and the one with the lowest share of companies taking measures to build resilience. In peer countries, the gap between the share of companies acknowledging being affected by physical risks and those taking adaptation measures varies from 5% in the Netherlands to 22% in Sweden, which is still significantly lower than the corresponding figure in Spain (49%). Regarding transition risks, approximately one-third of Spanish companies view these as risks, similar to other countries. However, Spain stands out because of the high share (46%) of companies believing these factors will not affect them and low share (21%) considering them as opportunities. With the increase in sustainability-related requirements, both regulatory and business‑related, it is vital for the corporate sector to understand how it can be impacted and transform these challenges into opportunities.
Note: Panel A shows responses to the following questions: i) “Thinking about the impact of climate change […], such as losses due to extreme climate events, including droughts, flooding, wildfires or storms or changes in weather patterns due to progressively increasing temperature and rainfall, what is the impact, also called physical risk, of this on your company?” and ii) “Has your company developed or invested in any of the following measures (”Adaptation strategy for physical risks”, ”Invested in solutions to avoid or reduce exposure to physical risks” and ”Bought insurance products to off-set climate-related losses”) to build resilience to the physical risks to your company caused by climate change?”. “Impact” represents the percentage of companies that identified physical risks as having either a “major impact” or a ”minor impact”. In Panel B, the shares for France and Germany do not add to 100% due to rounding issues in the original data.
Source: EIB Investment Survey 2023.
Most companies focus their investments and efforts related to reducing GHG emissions on waste minimisation and recycling as well as investments in energy efficiency. The least common actions, across countries, are generally investments in new, less polluting business areas and technologies, and renewable energy generation (Figure 1.37). In Spain, 58% of companies implemented measures for waste minimisation and recycling, making it the most popular option to reduce GHG emissions, although this figure is lower than in most of its peers. The second most common action is investments in energy efficiency, cited by 51% of Spanish companies. The Spanish corporate sector is the most active among its peers in terms of renewable energy generation (46% of companies). The least popular options are the use of sustainable transport, adopted by only 29% of companies, a much lower share than in other European countries in the analysis, and investments in new business areas and technologies, pursued by only 28% of Spanish companies.
Source: EIB Investment Survey 2023.
Fostering the use of sustainable financing instruments can help increase investments aimed at reducing GHG emissions and promote other sustainability-related initiatives. These instruments have gained significant popularity over the last decade. For instance, the issuance of sustainable corporate bonds has gradually increased in many countries. In Spain, between 2013 and 2023 the amount raised through sustainable bonds represented 10% of total corporate bond issuances (see Chapter 5, Figure 5.9, Panel B). However, like in the broader corporate bond market, the financial sector dominates sustainable bond issuance in Spain, accounting for 69% of total proceeds, a figure that surpassed most of the other countries analysed (Figure 1.38, Panel A). Most of the borrowing has been raised through green bonds. This holds across countries, with sustainability-linked bonds typically being the second most common option (Panel B). In Spain, however, the use of sustainability‑linked bonds has been negligible.
Source: OECD Corporate Sustainability dataset, LSEG, Bloomberg. See Annex A for details.
Green loans are more popular in Spain compared to other European countries, with significant growth since 2017 (see Chapter 5, Figure 5.12). Indeed, the OECD survey of Spanish companies highlights that the most used instruments by Spanish firms are green loans and sustainability‑linked loans (Figure 3.29). This tendency reflects the strong preference of Spanish corporations for bank financing over bond funding. Improving the overall functioning of domestic capital markets should therefore also have a positive impact on the use of corporate sustainable bonds.
Sustainable funds, which use sustainability factors as an input when deciding on their asset allocations, can influence the demand for sustainable financing instruments such as green or sustainability-linked bonds. In recent years, assets under management (AUM) of investment funds that label themselves as sustainable or climate‑focused have increased substantially (OECD, 2024[100]). In Spain, the AUM of such funds have grown much faster than the broader fund universe, particularly during the last decade, increasing from 1.6% of total Spanish fund AUM in 2013 to 7.2% in 2015. Following a few years of decreases, the share of sustainability-labelled funds in total fund AUM then started rising again and peaked at 7.3% in 2022.
Note: ESG funds have been selected based on i) the labelling, which included some keywords such as “Climate”, “ESG”, “Sustainable”, “Paris alignment” and “Climate transition”, in English and Spanish and ii) funds identified by Morningstar Direct as sustainable (i.e. explicitly indicating any type of sustainability, impact, or ESG strategy in their prospectus or offering documents).
Source: Morningstar Direct, OECD calculations. See Annex A for details.
Despite the substantial increase in popularity over the last decade, there are still significant barriers preventing companies from using sustainable financing instruments. According to the OECD survey of Spanish companies, the two most important factors hindering the use of such instruments are the lack of available information and the high associated costs. Moreover, existing contractual limitations may also restrict the effectiveness of these instruments and negatively impact investor demand. An OECD (2024[59]) analysis of various sustainable bond prospectuses shows that many allow for the use of proceeds to simply refinance existing projects and lack penalties for misuse of proceeds. Therefore, attention to contract design could help enhance investor confidence.
Acknowledging the challenges faced by companies, some countries have introduced policies to incentivise the adoption of sustainable financing instruments by offering subsidies and grants for expenses related to sustainable bond issuance. For instance, Singapore’s Sustainable Bond Grant Scheme covers up to SGD 125 000 for independent external reviews that adhere to internationally recognised standards for green, social, sustainability, sustainability-linked or transition bonds, provided certain criteria are met (MAS[101]). Similarly, Japan’s Financial Support Program for Green Bond Issuance offers subsidies for expenses incurred during external reviews of green bonds (Azhgaliyeva and Kapsalyamova, 2021[102]) and in Hong Kong (China) the Green and Sustainable Finance Grant Scheme subsidises eligible bond issuers and loan borrowers to cover their expenses on bond issuance and external review services (Hong Kong Monetary Authority, 2024[103]).
Promote initiatives targeted at non-financial companies to inform them about sustainable financing instruments and to provide practical guidance on issuance.
Conduct a review of the design of sustainable financing instruments with a view to ensuring their efficiency.
Evaluate options to support companies in obtaining ratings and external reviews for bonds that comply with internationally recognised green, social or sustainable bond frameworks.
The corporate sector will play a key role in enabling the transition to a low carbon economy. Increasing consumer and investor demand for sustainable corporate practices reflects this expectation. Properly designed sustainable financing instruments can help mobilise capital market financing to channel the funds needed to realise this. While Spain is a strong player in the adoption of sustainable financing instruments globally, this is predominantly led by the financial sector, leaving non-financial companies facing persistent barriers. Notably, challenges such as lack of available information and high costs hinder broader adoption. To optimise the use of sustainable financing instruments, authorities could consider the polices outlined below.
The lack of available information about sustainable financing products is the most frequently cited factor for not adopting these instruments by companies in the OECD survey of Spanish companies. To address this issue, Spanish authorities could promote initiatives targeted at non-financial companies to disseminate information about sustainable financing instruments such as green, social and sustainability-linked bonds and how they can help provide funding for investment projects. Spanish authorities could organise educational trainings and seminars tailored for their members in collaboration with entities such as the Chamber of Commerce and other business associations. These events, which could be led by experts from the stock exchange and other financial institutions, could be designed specifically to satisfy the needs and concerns of companies, offering practical guidance on the requisites, procedures and information disclosure required for different instruments as well as their associated costs and information on how to obtain a sustainability rating or accreditation.
Before incentivising the use of sustainable financing instruments, however, efforts should focus on ensuring their effectiveness. In practice, funds raised through green, social or sustainable bonds may not always be used to finance new green or social projects, as contracts sometimes allow them to refinance existing eligible projects. Additionally, prospectuses often do not specify penalties for issuers who fail to use all proceeds as intended, potentially reducing investor confidence in the issuers’ commitment to sustainability (OECD, 2024[59]). Therefore, reviewing the contractual design of sustainable financing instruments to refine their structure could improve their effectiveness and ultimately increase investor confidence, promoting wider adoption. Market participants should take stock of how sustainable financing instrument contracts are designed in Spain and assess whether this contributes to the goal of efficiently mobilising more funding to sustainability projects.
Another significant factor hindering the use of sustainable corporate bonds is the cost associated with their issuance. Aside from the typical expenses for issuing regular bonds, companies incur additional expenses when issuing sustainable bonds. These include the cost for external reviews and verification by third parties to ensure the bonds meet specified green criteria. For instance, green bonds often need to comply with recognised standards and frameworks such as the Green Bond Principles developed by ICMA or the European Green Bond Standard. Additionally, issuers must provide regular reports on the use of proceeds and the environmental impact of the funded projects, which requires allocating resources to tasks such as data collection, impact assessment and report preparation. Policy makers could evaluate the possibility of supporting companies in obtaining an external review or rating within an internationally recognised framework, subject to findings of the above recommended review of the contractual design.
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← 1. Scale-ups are companies that have profitable business models and that have grown at an annual rate of more than 20% in terms of turnover or number of employees over three consecutive financial years.
← 2. While effective from the start of 2018, the International Accounting Standards Board (IASB) allowed a temporary exemption for insurers, allowing them to continue applying IAS 39 until the start of 2023, when IFRS 17 became effective.
← 3. An ELTIF is a European collective investment framework for funds that invest in long-term projects (thereby lacking short-term liquidity) such as infrastructure, marketed to both institutional and retail investors (European Commission, 2015[104]).
← 4. The purchasing power standard (PPS), is the technical term used by Eurostat for the common currency in which national accounts aggregates are expressed when adjusted for price level differences using PPPs. Theoretically, one PPS can buy the same amount of goods and services in each country.
← 5. Since a tax is levied on the entire capital base, potential tax benefits for investments through the Swedish investment savings account will depend on the level of returns as well as on the government borrowing cost.
← 6. The timeframe has three phases: three days from receipt of the application in order to submit the first comments, two days for sending comments relating to the modifications resulting from the first comments, where appropriate, and three days for admission of the securities from when the information is complete. Most issues do not require comments and are thus fully completed within three days.