New capital rules for Spanish banks and credit institutions

Automatic summary, not yet reviewed

1. Credit institutions must at all times hold enough own funds to cover several types of risk: credit, dilution, position, settlement, counterparty, exchange rate, commodities and operational risk. The calculation methods will be set by regulation, and the Bank of Spain must authorize the more advanced internal methods.
2. External credit ratings may be used, but only from firms recognized by the Bank of Spain, which will assess their objectivity, independence and market credibility.
3. Institutions and their consolidable groups must publish each year a single document called "Información con relevancia prudencial" (information with prudential relevance) with data on their financial situation, risks and internal control. The Bank of Spain will set the minimum content and oversee compliance.
4. The Bank of Spain gains supervisory powers: reviewing institutions' systems, assessing their risks, coordinating with supervisors from other European Union countries, and periodically publishing its criteria and methodologies.
5. If an institution fails to meet the minimum own funds, the Bank of Spain may require additional funds, demand stronger controls, impose provisioning policies or restrict its business and operations.
6. During the first two years there is a transitional floor: own funds may not fall below 90% (first year) or 80% (second year) of what the previous rules would have required, to protect financial stability.

Who it affects

• Banks, savings banks and other credit institutions: They must calculate and hold minimum own funds by risk type, publish annual prudential information and submit to Bank of Spain supervision.
• Consolidable groups of credit institutions: They must consolidate their financial statements, coordinate internal systems and meet solvency requirements at group level.
• Bank of Spain (Banco de España): It receives new powers for supervision, international cooperation, disclosure of criteria and executive measures against institutions.
• Credit rating firms: Their ratings can only be used if the Bank of Spain recognizes them.
• Investors and the public interested in the financial market: They will get comparable annual information on institutions' solvency and risks.

Words worth knowing

Recursos propios (own funds)

The institution's own money and reserves, used to absorb losses and guarantee solvency.

Entidad de crédito (credit institution)

A company authorized to take money from the public and grant loans, such as banks and savings banks.

Grupo consolidable (consolidable group)

A set of entities in the same group treated as a single one when calculating solvency.

Riesgo operacional (operational risk)

Possible losses from internal failures, human error, systems or external events, not from the financial activity itself.

Calificación externa de crédito (external credit rating)

A score an independent specialized firm gives on the solvency of an institution or its issues.

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