- Entities that exceed certain thresholds will have to transfer their financial activity to a bank owned by a foundation
- The members of the board of trustees of bank foundations may not be, in turn, of the board of directors of the credit institution
The Council of Ministers today approved the Draft Law on Savings Banks and Bank Foundations, after passing the State Council process. The standard complies with the commitments contained in the Memorandum of Understanding (MoU) agreed with the European Union (EU) as part of the assistance program for the recapitalization of the financial sector. This agreement involves the approval of a new legal framework to clarify the role of savings banks as shareholders of banks, the reinforcement of the rules of good corporate governance and the incompatibility requirements both in the savings banks and in the banks controlled by them. As of now, the norm enters parliamentary procedure.
Regarding the savings, the Bill represents a return to the original limits of these institutions regarding their financial activity. This will focus on the retail business and its territorial scope of action. The limits are as follows:
- Material. Explicit linking of the savings banks' financial activity with retail clients and small and medium-sized companies. The savings banks will not be able to engage in complex financial activities.
- Territorial. The scope of action of savings banks may not exceed that of an autonomous community. However, it may exceed this limit as long as it acts on a maximum total of ten neighboring provinces.
- Volume. Savings banks may not have an asset of more than 10,000 million euros or a deposit quota above 35% of those of the autonomous community in which they operate. If these size limits are exceeded (systemic nature), the savings banks must transfer their financial activity to a bank, which will be participated by a banking foundation.
In addition, a new regulation of the governing bodies of the savings banks is introduced, which affects the general assembly, the control commission and the board of directors. The control commission is maintained because the savings banks lack shareholders and, therefore, it is necessary to regulate an electoral mechanism to constitute the general assembly. The control commission will ensure the proper functioning of this electoral procedure and the social work of the fund, among other functions related to the operation of the board of directors. The figure of the CEO has been removed.
An electoral system is established by virtue of which two fundamental objectives are sought: to avoid the political control of the savings banks and to attribute said control to the main stakeholders, the impostors. Specific:
- The general Assembly It will include the representation of the depositors, the founding will of the fund and the recipients of the social work.
- The number of general councilors It will be between 30 and 150. The mandate will be between 4 and 6 years.
- Representativeness is attributed to impostors between 50% and 60% of the general directors. The Public Administrations in no case may designate more than 25% of the general directors.
- There will be a turn of great impostors, of not less than 50%, to guarantee that they are adequately represented in the general assembly. The rest of the general councilors corresponding to this shift will be chosen by the system of arbitrators, designated by lottery among the rest of the depositors. The renewal of the general directors representing the depositors will be done by halves.
The norm increases, on the other hand, the professionalization of the governing bodies of the savings banks in the following aspects:
- Measures to ensure that members of the governing bodies The savings banks carry out their functions in their exclusive interest and in accordance with criteria of efficiency and good financial management. The incompatibility of the exercise of the position of member of the governing bodies with that of any elected political position and with any executive position in political parties, business and union organizations, as well as with high positions in public administrations is reinforced.
- It is no longer required that the board of directors reflect the proportions of representative quotas existing in the general assembly. On the contrary, it is required that at least half of the board members be independent, and those who are general directors cannot have such consideration.
- It requires that all members of the board of directors have the requirements of good repute, experience and good governance required by legislation for members of bank boards.
- Proportionality is also required based on the economic dimension of each box to determine the total number of members of the Assembly and the board of directors.
- More than half of the members of the board of directors and the control committee are required to be independent vowels. The chairman of the control commission must also have this condition.
- In line with the provisions of the Corporate Governance Order, the term of the independent members of the board of directors is limited to twelve years.
As for the banking foundations, the Draft Law defines its legal regime. Heirs of the foundations of a special nature provided for in Royal Decree-Law 11/2010, of July 9, on Governing Bodies and Other Aspects of the Legal Regime of Savings Banks, are those foundations that have a participation of more than 10% in a credit institution. The MoU approved by Spain demanded that a gradual divestment of the former savings banks in the banking entities take place until their participation reached levels of non-control. To promote this objective, the Bill provides for two measures that operate consecutively:
- It requires that the savings banks that currently carry out their actions under the indirect exercise regime, as well as the savings banks that have a volume greater than the limits provided for in the regulation (that is, when they hold a stake in a credit institution that reaches, in directly or indirectly, at least 10% of the entity's capital or voting rights, or that allows it to appoint or dismiss any member of its administrative body), become bank foundations.
- Once transformed into banking foundations, a legal regime has been designed for these new entities that reinforces financial supervision based on the degree of effective control that they exercise in the investee bank.
The Bill distinguishes:
- General obligations for all bank foundations (those that have a participation in the credit institution of at least 10%, regardless of whether or not they were previously savings banks). However, this transformation obligation is only imposed on current ordinary foundations that, after the Law comes into force, increase their participation in the credit institution above 10%.
- Obligations for bank foundations with a participation in the credit institution of at least 30%.
- Obligations for bank foundations with a participation in the credit institution of at least 50% or with a controlling interest.
All banking foundations, without exception, are subject to rigorous requirements of corporate governance. In particular, the members of the board of trustees of banking foundations are also prevented from being members of the board of directors of the credit institution. In addition, they will be subject to a control regime that will be carried out by the Bank of Spain within the framework of its financial supervision functions and by the corporate governance protectorate. The protectorate will correspond to the Ministry of Economy and Competitiveness when the banking foundation has a main scope of action superior to that of the autonomous community.
In addition, bank foundations with a participation of more than 30% in a credit institution must submit to the Bank of Spain for approval a management protocol of your participation in the bank. This will regulate the criteria for managing the foundation's participation in the bank, the relations between them and the rules on related-party transactions and conflicts of interest. The management protocol will be presented to the Bank of Spain within two months from the constitution of the banking foundation. The Bank of Spain will review, at least annually, the content of the management protocol.
Additionally, bank foundations with a participation greater than 30% will be required to present a financial plan that, in the case of entities with a participation of more than 50% or control, it will include an investment diversification and risk management plan that avoids concentration on assets issued by the same entity and establishes the provision of a reserve fund. The financial plan will be presented to the Bank of Spain within two months from the constitution of the banking foundation. It will contain, at least, the following extremes: reasonable estimates of the equity needs of the investee in different macroeconomic scenarios, the strategy of the foundation to obtain those resources and the basic criteria of the investment strategy in credit institutions.
The Reserve fund It will be used for the possible needs of the investee's own resources that cannot be covered with other resources and that, in the opinion of the Bank of Spain, could jeopardize the fulfillment of its solvency obligations. To this end, the financial plan will contain a calendar of minimum allocations to the reserve fund until the target volume is reached, which, in order to guarantee the sound and prudent management of the investee, is determined by the Bank of Spain. This level will be set according to the needs of own resources, the value of risk-weighted assets, whether the entity's shares are admitted to trading and the level of concentration in the financial sector of the foundation's investments. It is expressly foreseen that the reserve fund will be used when there has been a significant decrease in the equity of the investee that, in the opinion of the Bank of Spain, could jeopardize compliance with solvency regulations.
Bank foundations that have a 50% or greater participation or a percentage of control of a credit institution, go to a capital increase of said investee, may not exercise the political rights corresponding to the increase in their participation. They can only approve distribution of dividends with a reinforced quorum and majority (presence of 50% of capital on first call and 25% on second call, plus approval of two thirds of the capital present at the Meeting).
As a whole, the regulation related to savings banks and bank foundations must respect the competence of the autonomous communities, with the State having to enact basic legislation. The distribution regime of competencies settled down. In the case of banking foundations, as well as in ordinary foundations, state or regional guardianship will depend on whether their main activity is carried out in a single autonomous community. In this case, the protectorate will be exercised by the community. If it is developed in more than one community, the protectorate will correspond to the State, through the Ministry of Economy and Competitiveness.