Can National Development Banks translate the EU´s new goals? Lessons from the Spanish case

Since 2015, the European Union (EU) has committed to ambitious environmental, social, and technological goals, such as net-zero emissions, digitalization, and social inclusion, under frameworks like the UN Sustainable Development Goals and the Paris Agreement. Achieving these goals requires substantial financial resources, and the EU plans to leverage its financial architecture, including institutions like the European Investment Bank (EIB) and National Development Banks (NDBs). These banks are expected to play a key role in financing these public goals, not only as direct investors but also as mobilizers of resources and innovators in policy. On the one hand, criticisms have been raised about the weaknesses of this financial system and its components for responding effectively to this mandate. On the other hand, this mandate is often used as an example of how the EU is going beyond its regulatory framework and transforming itself into a catalytic or an investment state. This article examines how a medium-sized NDB like Spain’s Instituto de Crédito Oficial (ICO) is navigating this "market-state paradox", balancing the promotion of market competition (regulatory state) with industrial policies (investment state). To do so, it analyzes ICO’s dual functions: as a promotional bank (PB) fostering and participating in market competition, and as a financial instrument for economic policy (FIEP) channeling EU resources. The study evaluates institutional obstacles and levers affecting ICO’s performance, using a mixed methodology that includes academic literature, public documents, and 45 interviews with high-level stakeholders conducted between 2022 and 2023. The article aims to contribute to the limited literature on ICO by assessing its capacity to balance its dual nature and effectively support EU goals.