All questions

The regulatory regime applicable to banks

The Spanish regulatory regime for credit institutions is currently set out in the Credit Institutions Solvency Regulations, Law 26/2013, of 27 December, on savings banks and banking foundations (Savings Banks and Banking Foundations Law) and its regulations, and Law 13/1989, of 26 May 1989, on credit cooperatives. This regulatory framework may be supplemented by the circulars, rules and guidelines issued, from time to time, by Banco de España or by the ECB.

A credit institution is defined under Spanish law as a company duly authorised to receive from the public deposits or other forms of repayable funds, and grant credits for their own account. Spanish credit institutions may therefore primarily engage in a number of retail banking services.

Credit institutions must be recorded in a register maintained by Banco de España before they commence banking activities.

There are other types of regulated entities that play an important role in the Spanish market for financial services, among which financial credit establishments, electronic money entities and payment service entities are especially noteworthy.

i Credit institutions: banks, savings banks and credit cooperatives

Credit institutions consist of banks, savings banks, credit cooperatives and the Official Credit Institute (ICO), which is the country's financial agency. Excluding the figures relating to the ICO, banks represent 44.83 per cent of all Spanish credit institutions, credit cooperatives represent 53.45 per cent and savings banks the remaining 1.72 per cent. Banks are nevertheless by far the most important category of credit institution in Spain, as the value of their assets represents 95.44 per cent of the sector, while credit cooperatives' represent 4.5 per cent and savings banks 0.07 per cent.

The raising of funds from the general public, except through activities subject to the securities markets regulations, is reserved for credit institutions.

Based on the foregoing figures, banks have a central role in the financial system because of the sheer volume of their business and their involvement in every segment of the Spanish economy. Most Spanish banks provide a full range of services for corporate and private customers, including collection and payment services outside Spain through foreign branches. Banks have the legal form of public limited companies, and are therefore subject to general principles of company law as well as banking regulations.

Savings banks are a specific type of credit institution that until recently accounted for nearly half of the Spanish financial sector. Savings banks tended to be locally oriented entities of variable (but generally limited) size with strong economic and social ties to their home region. Although savings banks fully participated in the market, they were a special category within the financial services industry, as they were structured as foundations rather than companies and governed by representatives of collective shareholders: mainly depositors, employees and local authorities. Any positive result was allocated to social welfare and cultural projects.

The corporate model of savings banks has completely changed in recent years. After a number of partial reforms during 2011 and 2012 (as a consequence of which most of the Spanish savings banks were transformed into banks through different integration processes), a comprehensive revolution of their legal regime was put in place in December 2013 when the Savings Banks and Banking Foundations Law was passed. That regulatory revolution considerably deepened in 2015 and 2016 as a result of the approval of various pieces of ancillary legislation developing the Savings Banks and Banking Foundations Law.

Since 2010, 43 of the 45 savings banks (99.39 per cent of the aggregate average assets of the sector) have been part of a consolidation process, which has resulted in seven banking groups now operating. The number of branches has been reduced by 46.8 per cent and the workforce by 40.6 per cent since late 2008. In the light of these radical changes to the sector, the Savings Banks and Banking Foundations Law aims to limit the role of savings banks in the credit institutions sector (capping the balance sheets, market share and geographical scope of banking activities), clarifying the role of former savings banks in their capacity as shareholders of credit institutions, and strengthening incompatibility requirements regarding the governing bodies of the former savings banks and the commercial banks controlled by them. Some of the main features of the new regime are as follows:

  1. savings banks will only be entitled to engage in the solicitation of repayable deposits from the public and the granting of credits within the territory of one autonomous region or a maximum of 10 neighbouring provinces;
  2. savings banks need to be engaged mainly in the deposit-taking and lending business;
  3. any person holding an executive position in a political party, trade union or professional association, elected representatives in public administrations, senior officers in such public administrations and those who have held any of the foregoing positions during the past two years, will not be allowed to be a member of a management body of a savings bank. This is a breakthrough on the prior regime that aims to avoid previous failures in the management of savings banks;
  4. any savings bank holding assets in excess of €10 billion or with a market share in relation to the deposits in its autonomous region of more than 35 per cent shall transfer its financial activity to a credit entity and become a banking foundation or a regular foundation, depending on the stake it holds in the entity receiving its financial activity; and
  5. banking foundations are those foundations with a (direct or indirect) holding in a credit entity of at least 10 per cent of its share capital or voting rights, or such other percentage allowing the appointment or removal of at least one member of the board. These entities shall have the purpose of managing their stake in the relevant credit institutions and pursuing their social project or corporate responsibility programme. Depending on the stake of the banking foundation in the credit entity (the relevant thresholds being 10, 30 and 50 per cent), a number of internal rules and protocols shall be in place. Additionally, the dividend distribution of credit institutions controlled by banking foundations shall be subject to a minimum voting majority of two-thirds.

Credit cooperatives are private institutions whose corporate purpose is to attend to the financial needs of members and those of third parties by means of the development of those activities that are also carried out by credit institutions. Their current regime is contemplated in Law 13/1989, of 26 May 1989, on credit cooperatives as its developing regulation, as approved by Royal Decree 84/1993 of 22 January.

ii Other types of regulated entities that do not qualify as credit institutions under Spanish lawFinancial credit establishments

Financial credit establishments (EFCs) are a special type of regulated entity that do not qualify as credit institutions (although they did until the Credit Institutions Solvency Law was approved) and that carry out, in a professional manner, one or more of the following activities:

  1. granting of loans and credits, including consumer loans and mortgage-backed loans;
  2. factoring, with or without recourse, and other ancillary activities;
  3. leasing;
  4. granting of security interests; and
  5. granting of reverse mortgages.

The legal framework governing EFCs is established in Law 5/2015, of 27 April, on promoting corporate financing (Law 5/2015), the main features of which include the following:

  1. the creation of EFCs requires authorisation from the Ministry of Economy, which, in turn, requires the issuance of a mandatory prior report by Banco de España;
  2. Law 5/2015 regulates the existence of hybrid institutions (i.e., EFCs that also provide payment services or issue electronic money); and
  3. a significant portion of the obligations applicable to credit institutions on solvency, conduct of business, control of major shareholdings and transfer of business, and corporate governance are also applicable to EFCs.

Finally, in October 2015, the Ministry of Economy made public a draft regulation aimed at developing the legal framework of EFCs. The draft regulation has not yet been approved.

Electronic money entities

Electronic money entities (EDEs) are recognised as a special type of regulated entity that issues electronic money. The legal regime for EDEs was established in 2008 and amended in 2011 by a law regulating the issuing of electronic money and the legal regime of EDEs, partially implementing Directive 2009/110/EC. Secondary legislation was approved by Royal Decree-Law 778/2012, of 4 May, developing the legal framework of EDEs, clarifying the definition of e-money and the scope of the applicable Spanish regulations, and establishing the requirements for the setting up and running of EDEs, since their supervision and sanction regime is very similar to that applicable to credit institutions. Royal Decree-Law 778/2012 fully implemented Directive 2009/110/EC.

Payment services entities

Payment service entities are entities regulated by Banco de España that are engaged, in a professional manner, in the rendering of payment services, as defined in point (3) of Article 4) of Directive (EU) 2015/2366 of the European Parliament and of the Council of 23 November 2015 on payment services in the internal market. The legal regime in connection with the rendering of payment services is set forth in Royal Decree-Law 19/2018, of 23 November, of payment services and other urgent measures on financial matters.