Developments in the legal regime applicable to credit institutions
As part of the transposition of Directive 2013/36/EU (CRD IV) and Regulation EU 575/2013 (CRR) and with a view to forming a Banking Union, Law 10/2014, of June 26, 2014 on the regulation, supervision and solvency of credit institutions (the “LOSS”) was published last Friday, June 27 in the Official State Gazette. This law responds to the growing need for basic regulations that guarantee the application of a common legal regime for credit institutions which also respects European Union legislation.
The aim of the LOSS is to adapt the Spanish legal system to changes in legislation imposed at an international level and to group together in a single text the main organizational and disciplinary rules for credit institutions. The law therefore addresses the monitoring of their solvency and risk management, and other aspects of their regulation, such as reserving the business activity, controlling access by and the suitability of executives and the main shareholders, the requirements of corporate governance and even the treatment of entities with viability problems.
Furthermore, a Draft Royal Decree (the “LOSS Regulations”) is already underway which will implement in greater detail aspects such as access to the activities of credit institutions, solvency or supervision, while at the same time repealing other provisions regarding the legal regime for credit institutions.
- Authorization and registration of credit institutions
– Broadening of the powers of the Bank of Spain in relation to the authorization, registration and revocation of credit institutions, notwithstanding the duties of the European Central Bank and in collaboration with this institution.
– Power of the Ministry of Economy and Competitiveness to authorize merger and spin-off transactions or the assignment of assets and liabilities in which a bank is involved, or any other agreement with similar economic or legal effects.
- Corporate governance and remuneration
– Establishment of efficient corporate governance systems.
– Implementation of remuneration policies that are more in line with the medium-term risks of credit institutions.
– Assessment of whether credit institutions’ capital is suitable for the risk they assume.
– Establishment of capital buffers.
– The Bank of Spain will be the authority that supervises credit institutions. It will also be able to intervene in credit institutions’ activities by introducing more stringent capital requirements, provisions or restricting the distribution of dividends, among others.
- Information and publication
– The LOSS regulates the information on solvency legislation that the Bank of Spain must publish periodically and the obligations to report to other authorities in urgent situations.
– It also establishes the reserved nature of data, documents and information in the possession of the Bank of Spain, and the confidentiality obligation which is applicable to employees and persons who perform work for the Bank of Spain.
- Penalty regime
– Amendments to the amounts of the applicable penalties, new types of penalties resulting both from CRD IV as well as from the new rules on suitability and transparency, and changes to the penalties that may be imposed on institutions and directors.
– The amount and method of calculating applicable infringements and their disclosure are also modified.
- Other developments:
– Rules on transparency and protection of clients of banking services.
– Legal regime for credit financial establishments.
– Composition of the Managing Committee of the Deposit Guarantee Fund.
– Preference shares and IPSs.
– Modification of the Stock Market Law in relation to the rules on solvency, corporate governance and the remuneration of investment services firms.
Garrigues Corporate and Commercial Law Department