Spain's leading financial institutions have become major power players in the South Florida banking community. What are the advantages for Spanish banks to invest in South Florida?

Spain and South Florida share strong cultural ties. Additional positive investment incentives were a favorable U.S. currency exchange rate and the opportunity for expanded geographic and economic diversity. These strong factors motivated well-capitalized Spanish institutions to enter into a promising market where they are new, fresh players.

Before investing in TotalBank, Grupo Banco Popular Español (GBPE), Spain's third-largest banking group, analyzed various markets throughout the United States and finally chose South Florida as the most favorable choice with its dynamic economic potential, especially within the Hispanic population.

However, new territory brings new challenges. For a Spanish bank to become successful, it requires carefully adapting the thinking and culture of the South Florida banking business and seamlessly fusing it with the positive aspects of the Spanish model.

One example involves the product life cycle of a typical home mortgage. The traditional American banking methodology has been to finance a mortgage, make the money and then sell or securitize it effectively turning it into a commodity product. The Spanish approach is patient and focuses on the long term, always looking to develop a long-term relationship with the customer. For example, the Spanish model will typically retain the mortgage customer and leverage this critical financial service realizing the potential for a broad array of current and future financial services.

With the downturn of South Florida's residential and commercial real estate market, there are many banks in Florida that do not have the necessary access or capital to survive. This severely limits the access for loans to individuals and businesses. Consequently, banking experts predict the failure of many traditional community banks because they lack capital.

In Florida, more than 275 banks may be reduced to about 100 within the next several years. This positions Spanish banks, including GBPE, with the opportunity for future expansion. A viable back-to-basics approach will help us be poised for growth organically, not only by gaining new market share by opening new locations and preempting it from the competition that is not able to serve their customers. The Federal Deposit Insurance Corporation (FDIC) reported that 140 small banks failed last year, and so far this year, 86 banks have already failed.

Fortunately, Spain's financial institutions have not faced the same crisis as it relates to lending due to its healthy economic `no bailout' system. Spain's banking regulations require banks to make generic provisions, no matter the size or quality of the loan. The United States does not have this type of reserve provision. But in Spain, a bank must provide a fixed percentage reserve as a cushion. If an economic downturn occurs, the bank already has ``over-reserved'' for potential losses.

Grupo Banco Popular Español has the critical advantage of having substantial capital. This is a tremendous advantage in a market where many community banks are lacking capital strength which seriously limits their growth opportunities. Strong capital reserves expand the market for lending to small business which is at the heart of the American economy.

In the United States, bank relationships are more of a commodity. By contrast, Spain's long-term retail banking approach offers quality service and establishes personal relationships with success depending, not on one person or the size of the bank, but on having a strong team for the mutual benefit of both the customer and the bank.

We believe the next 12 to 18 months will be a time for tremendous opportunity and substantial market-share growth in South Florida and we look forward to this challenge.

Jorge Rossell is chairman and chief executive of TotalBank