The economy of the Valencia region (Comunidad Valenciana) in Spain has suffered the consequences of Spanish and Valencian corruption in its banking and government policies. The scandalous/outrageous and dangerous 26% unemployment rate nationwide has reached almost 30% in the Valencia region. From a regional perspective, there have been historical tensions between centre and periphery, seen with the Franco regime (1939¿1975) that reaffirmed the pre-eminence of private commercial banks and handicapped traditional savings banks, implementing a practice from the 1920s called the principle of territoriality. Until 1974 the savings banks or 'cajas' remained outside the Spanish clearinghouse system until Fuentes Quintana¿s Reform (1977) that brought a competitive environment for savings and private banks, resulting in their convergence. Savings banks raised their share of total national deposits from 35 to 45 percent and after 2009 large conglomerates were created, but in the Valencia region this did not take place until 2011 when 'cajas' transferred their banking business to commercial banks. Banco Valencia, the sixth largest commercial bank in Spain, founded in 1900 and the largest regional savings bank from each of the three Valencian Community provinces (Castellón, Valencia and Alicante) vanished completely at the beginning of the 21st century. Now, all large-scale credit operations are no longer decided in the region, but rather in Madrid, Barcelona or elsewhere, leaving out regional developers from decisions that are now handled by larger national conglomerates. At the time of writing of this paper is being, many events and answers to these questions still lie with the court room; meanwhile, there is no regional financial entity of critical mass left in the Valencian Community. At the end of the paper we analyse the effects of the financial-system crisis on small and medium enterprises (SME or PYMES) in the Valencian Community from 1995-2012.