Published by EH.NET (January 2009)

Mauro F. Guillen and Adrian Tschoegl, Building a Global Bank: The Transformation of Banco Santander. Princeton, NJ: Princeton University Press, 2007. x + 280 pp. $35 (cloth), ISBN: 978-0-691-13125-2.

Reviewed for EH.NET by Joseph M. Santos, Department of Economics, South Dakota State University.

In Building a Global Bank, Mauro F. Guillen and Adrian Tschoegl of the Wharton School chronicle how Banco Santander, established in 1857 and family-led since 1909, ascended from Spanish-provincial lender to tenth-largest bank in the world (as measured by 2005 tier-one capital). Santander has remained primarily a commercial bank and today it is most active in Europe and Latin America.

The authors set out to explain how this long-lived family-led Cantabrian institution, shaped by a uniquely Spanish political, social, economic, and cultural history, expanded globally and with such success in retail banking ? a financial-services niche with high regional barriers to entry imposed by local customs. Along the way, they showcase Santander?s Bot?n family and discuss in some detail the advantages and disadvantages ? for Santander, but also for banking more generally ? of family-led retail-bank management.

The authors proffer a sensible and well-reasoned explanation for how Santander achieved its global-player status, which they argue took shape in the 1970s thanks, in large part, to its earlier commitments to commercial banking. In essence, Santander?s commercial-bank model shielded it from direct exposure to Spanish industry and, hence, enabled it to escape relatively unscathed the economic crises of the 1970s that eliminated or weakened severely so many of its domestic and international rivals. Hence, Santander exited the 1970s with a tremendous competitive advantage: it retained the capabilities to innovate, merge, and acquire ? in effect, to hunt rather than to be hunted. These capabilities proved particularly crucial in the 1980s and 1990s, when Spain joined the European Union, the European (and, so, Spanish) banking sector liberalized, and Spanish banks were forced to compete with their larger European rivals. (In the early 1980s, Santander was the smallest of Spain?s seven largest banks, the largest of which was ranked 100th in the world.) Santander?s merger-and-acquisition wave began in Spain (where by the early 2000s Santander and BBVA essentially shared the domestic market with myriad well-established savings banks), moved to Latin America ? and, most importantly, Argentina, Chile, Mexico, and Brazil (where by the 1990s large-scale financial deregulation and shared and familiar languages made Santander the largest bank in the region), and then returned to Europe (where by 2004 Santander?s initial strategy to acquire small stakes in several banks evolved to allow larger acquisitions, the most notable of which was Abbey National Bank in the United Kingdom).

Although Santander?s growth over the last two decades has been exceptional, its returns on equity have not. Nevertheless, the authors speculate that Santander?s acquisitions have served its shareholders well in the sense that shareholders? returns would have been no greater had they purchased (counterfactually) the otherwise-independent banks that Santander ultimately acquired. As for family-led bank management, the authors contend that, on balance, Santander has benefited throughout much of its history from the Bot?n?s ?decisive …top-down? leadership ? an outcome that demonstrates, if nothing else, that family leadership is not incompatible with successful bank management (p. 61).

Building a Global Bank contributes much to the current debate among policymakers, academics, and bankers on the wisdom of universal banking and the characteristics of good governance. In particular, it emphasizes the merits of both a single-focused commercial-banking business model and family-led governance. Nevertheless, readers may wish that the authors approached the case of Banco Santander with more analysis and less description. In particular, the authors somewhat neglect the important question of how Santander ? and, most importantly, the Bot?n leadership ? knew to focus, almost exclusively, on commercial banking. To be sure, despite the success of Santander?s approach, the authors concede that, ?[t]here is some dispute as to whether Santander?s small role in industry was planned? (p. 38). Consequently, readers are left to wonder if and how our understanding of Santander?s experience should shape, more generally, bank policy and strategy going forward.

In any case, the Santander experience is worth reading about and Building a Global Bank offers an excellent opportunity to do so. In addition to archival materials and secondary sources, the authors draw extensively on myriad interviews with financial-industry leaders, policymakers, and journalists. In doing so, they write for a general audience and offer an accessible and data-rich institutional history, complete with a detailed (seventeen-page) chronology of the bank?s evolution and several citation-filled pages of endnotes.

Joseph M. Santos ( is a professor of economics at South Dakota State University where he teaches undergraduate and graduate courses in macroeconomics and banking. His current research examines early North American futures trading and the evolution of the Canadian Wheat Board.