• A Monitoring Commission is created that will establish the criteria so that the holders can avail themselves of arbitration
  • There will be an extraordinary spill to the Deposit Guarantee Fund to give liquidity in the exchange for shares

The Council of Ministers today approved a Royal Decree Law on Preferential Participations and Subordinated Debt of Credit Institutions in Restructuring or Resolution, in which mechanisms are articulated to monitor the arbitration processes and are established, exceptionally , liquidity mechanisms for the exchange of these products.

The regulation encourages the creation of a Monitoring Committee for arbitration processes related to preferred shares. Its objective is to analyze and evaluate arbitration procedures in entities that have received public support.

The Commission will be chaired by the president of the CNMV and will have the deputy governor of the Banco de España, as vice president. The rest of the Commission is made up of:

  • The general secretary of Health and Consumption, of the Ministry of Health, Social Services and Equality.
  • The Secretary General of the Treasury and Financial Policy, of the Ministry of Economy and Competitiveness.
  • The president of the Council of Consumers and Users.

The Commission will invite the representatives appointed by the consumer authorities of the Autonomous Communities and the National Consumer Institute who have participated or will participate in the procedures for the resolution of claims, to participate with voice but without vote. The Commission will be assisted by a secretary, designated by the CNMV.

The functions of the Commission are as follows:

  • The analysis of the factors that have motivated the presentation of judicial and extrajudicial claims.
  • The quarterly submission of a report to the Congress of Deputies on the fundamental elements of the claims.
  • Where appropriate, the submission of proposals to the competent authorities to improve investor protection in the marketing of this type of product.
  • The Commission will determine the basic criteria to be used by the entities in which the Fund for Orderly Bank Restructuring (FROB) participates in order to offer its clients arbitration. The Commission will specify the criteria to designate the group of clients whose claims, in view of the special difficulty of their personal or family circumstances, must receive priority processing by the entities in which the FROB participates. The Commission will transfer these criteria to the Fund, which will give the necessary instructions for its investees to adopt them. The Commission will agree on these criteria at its constituent meeting and may review them quarterly.

The Government has also articulated a liquidity provision mechanism by the Deposit Guarantee Fund (FGD) for holders of non-liquid shares of entities undergoing restructuring.

In the framework of the reform and recapitalization of the Spanish financial sector, based on the restructuring and resolution plans approved by the European Commission in accordance with the State aid regulations, an exchange of subordinated debt instruments will be carried out and preferred shares for capital of these entities.

Once the swap operations are completed, the Government considers it essential to offer the possibility of obtaining liquidity to the holders of shares in the case of Catalunya Banc (CX) and Nova Galicia Banco (NCG), since these entities are not listed on secondary markets or They are scheduled to do so in the medium term.

To this end, the Royal Decree Law that the Council of Ministers has approved today contains a provision that provides the FGD with legal capacity to acquire the unlisted shares resulting from the conversion of hybrid capital instruments and subordinated debt. In addition, the FGD will preferentially acquire the shares of those clients of the entity that are in a situation of special difficulty due to their personal and family circumstances in accordance with the criteria established by the Arbitration Commission. The FGD is also trained to subscribe shares or debt of the Management Company for Assets from Bank Restructuring (Sareb), so that it can collaborate with the FROB in financing this instrument.

In order to maintain a healthy equity position of the Deposit Guarantee Fund, a special contribution to the FGD is established, distributed in tranches of 3 per thousand on computable deposits.

A first tranche, equivalent to two fifths, must be satisfied within 20 business days from December 31, 2013. In relation to this tranche, the FGD Management Commission may establish a series of exemptions:

  • The non-application of this tranche to the entities mostly owned by the FROB.
  • A deduction of up to a maximum of 50% in contributions in the case of entities adhering to the FGD whose calculation base does not exceed 5,000 million euros.
  • A deduction of up to a maximum of 30% of the amounts invested by entities before December 31, 2013 in the subscription or acquisition of shares or subordinated debt instruments issued by Sareb.

A second tranche, equivalent to the remaining three fifths, to be paid from January 1, 2014 according to the payment schedule established by the Management Commission within a maximum period of 7 years. Without prejudice to the aforementioned payment schedule, the amount corresponding to this second tranche will be recorded as FGD equity on the date the first tranche is settled.

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