Rules to keep Spanish banks sound and supervised

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1. It defines credit institutions as authorized companies that take deposits and other repayable funds from the public and grant credit on their own account. Only banks, savings banks, credit cooperatives and the Instituto de Crédito Oficial qualify.
2. Taking repayable funds from the public is reserved exclusively to authorized and registered credit institutions. Anyone not authorized is banned from using the names reserved for these entities or any similar confusing name.
3. The Bank of Spain (Banco de España) authorizes the creation of credit institutions, registers them, supervises them and sanctions them. Authorization requests must be resolved within six months, and in any case within twelve; if there is no answer, the request is deemed denied.
4. Anyone wanting to acquire a qualifying holding, at least 10% of capital or voting rights, must notify the Bank of Spain in advance, which assesses the acquirer's suitability and the financial strength of the deal. If bought without notice, the voting rights attached to those shares cannot be exercised and sanctions may follow.
5. Board members and executives must be honorable, have adequate knowledge and experience, and be able to devote enough time to the role. Their positions must be registered in advance in the Bank of Spain's register of senior officers, and there are limits on how many positions they can hold at once.
6. Institutions must have sound corporate governance, a General Viability Plan approved by the Bank of Spain, and nomination and remuneration committees with independent directors. Executives' variable pay is tightly limited: it cannot exceed 100% of fixed pay unless shareholders approve, and at least 40% must be deferred.
7. Institutions must meet a combined requirement of additional capital buffers, such as the capital conservation buffer of 2.5% of their risk exposure. If they fail, distributions such as dividends are restricted and they must submit a capital conservation plan to the Bank of Spain.
8. A sanctioning regime establishes very serious, serious and minor offenses. Fines for very serious offenses can reach 10% of annual net business volume, or between €5,000,000 and €10,000,000, and responsible executives can be suspended or barred from office.

Who it affects

• Customers and savers with deposits at banks, savings banks and cooperatives: Their institutions are subject to authorization, supervision and capital buffers to protect their money.
• People wanting to buy significant stakes in a bank: They must notify the Bank of Spain in advance and can be assessed and sanctioned.
• Board members and executives of credit institutions: They must be fit for the job, register their positions, limit outside roles and face personal sanctions.
• Credit institutions themselves: They must meet solvency, liquidity, governance and pay requirements, with fines if they fail.

Words worth knowing

Entidad de crédito (credit institution)

An authorized company that takes deposits from the public and grants credit, like a bank.

Participación significativa (qualifying holding)

Holding at least 10% of an entity's capital or voting rights, or having notable influence over it.

Colchón de capital (capital buffer)

Extra money a bank must hold above the minimum, to absorb unexpected losses.

Recursos propios (own funds)

The bank's own funds, mainly capital and reserves, used to cover losses.

Pruebas de resistencia (stress tests)

Exams that simulate bad scenarios to check whether a bank would survive without failing.

It summarizes the law as published in the BOE. It is written by artificial intelligence and may contain mistakes: the official text is what counts. Read the official text · How we make summaries