- Entities that exceed certain thresholds will have to transfer their financial activity to a bank participated by a foundation
- The members of the board of trustees of the banking foundations may not be, in turn, of the board of directors of the credit institution
The Council of Ministers approved today the Draft Law of Banks and Banking Foundations, after passing the process of the State Council. 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 implies the approval of a new legal framework to clarify the role of savings banks as shareholders of banks, the strengthening of the rules of good corporate governance and the incompatibility requirements both in the banks and in the banks controlled by them. As of now, the norm enters parliamentary proceedings.
Regarding the savings, the Bill supposes 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 financial activity of the savings banks with retail clients and small and medium enterprises. The savings banks may not engage in complex financial activities.
- Territorial. The scope of the savings banks may not exceed that of an autonomous community. However, it may exceed this limit provided it acts on a total maximum of ten provinces bordering each other.
- 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 (systemic nature) are exceeded, the funds have to transfer their financial activity to a bank, which will be participated by a banking foundation.
It also introduces a new regulation of the governing bodies of savings banks that 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 shall 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 deleted.
An electoral system is established by virtue of which two fundamental objectives are to be achieved: avoid political control of the boxes and attribute said control to the main stakeholders, the imposters. Specific:
- The general Assembly It will include the representation of depositors, the founding will of the bank and the recipients of the social work.
- The number of general counselors It will be between 30 and 150. The mandate will be between 4 and 6 years.
- Representativeness is attributed to imposters between 50% and 60% of general counselors. In no case may the Public Administrations appoint more than 25% of the general directors.
- There will be a turn of big imposters, of not less than 50%, to ensure 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 committees, designated by lottery among the other impostors. The renewal of the general councilors representing imposters will be done by halves.
The norm increases, on the other hand, the professionalization of the governing bodies of savings banks in the following aspects:
- Measures to ensure that members of governing bodies of the boxes perform 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 office and with any executive office in political parties, business organizations and trade unions as well as with high positions of 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 members of the board 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 honorability, experience and good governance required by the legislation for the members of the councils of the banks.
- Proportionality is also required based on the economic dimension of each fund to determine the total number of members of the Assembly and the board of directors.
- It is required that more than half of the members of the board of directors and the control commission be independent vowels. The chairman of the control commission must also have this condition.
- The mandate of the independent members of the board of directors is limited to twelve years in line with the provisions of the Corporate Governance Order.
As for the bank foundations, the Bill defines its legal regime. Heirs of the special foundations provided for in Royal Decree-Law 11/2010, of July 9, on Government Bodies and Other Aspects of the Legal Regime of Savings Banks, are those foundations that have a participation greater than 10% in a credit institution. The MoU approved by Spain demanded that there be a gradual divestment of the old savings banks in the banking entities until their participation reached levels of non-control. To promote this objective, the Bill provides for two measures that operate consecutively:
- It obliges that the funds that are currently carrying out their actions in indirect exercise regime, as well as the boxes that have a volume greater than the limits provided in the standard (that is, when maintaining a participation in a credit institution that reaches, in a way Directly or indirectly, at least 10% of the capital or voting rights of the entity, or allowing it to appoint or remove a 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 they exercise in the investee.
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 boxes). 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 banking foundations with a participation in the credit institution of at least 30%.
- Obligations for banking foundations with a participation in the credit institution of at least 50% or with a controlling interest.
All bank foundations, without exception, are subject to rigorous requirements of corporate governance. In particular, the members of the board of trustees of the banking foundations are prevented from being 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 in the framework of their financial supervision functions and by the protectorate in corporate governance. 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 greater 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 management criteria for the foundation's participation in the bank, the relations between the two and the rules on related transactions and conflicts of interest. The management protocol will be submitted to the Bank of Spain within two months of the establishment 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 greater than 50% or of control, it will include an investment diversification and risk management plan that avoids the concentration in assets issued by the same entity and establishes the provision of a reserve fund. The financial plan will be submitted to the Bank of Spain within two months of the establishment of the banking foundation. It will contain, at least, the following extremes: reasonable estimates of the entity's own resources needs in different macroeconomic scenarios, the foundation's strategy 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 own resources of the investee 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 reaching the objective volume that, in order to guarantee the sound and prudent management of the investee, the Bank of Spain determines. This level will be set based on 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 anticipated 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 endanger compliance with solvency regulations.
Bank foundations that have a participation equal to or greater than 50% or a percentage of control of a credit institution, which go to a capital increase of said investee credit institution, they may not exercise the political rights corresponding to the increase in their participation. They may only approve distribution of dividends with a quorum and majority reinforced (presence of 50% of the capital in the first call and 25% in the second call, plus approval of two thirds of the capital present at the Meeting).
Together, the regulation regarding savings banks and banking foundations must respect the competence of the autonomous communities, with the State issuing basic legislation. The distribution regime of competitions settled down. In the case of banking foundations, as well as ordinary ones, 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 develops in more than one community, the protectorate will correspond to the State, through the Ministry of Economy and Competitiveness.