EN 
 
 
OPINION OF THE EUROPEAN CENTRAL BANK 
of 22 July 2009  
on bank restructuring and reinforcement of credit institutions’ own funds  
(CON/2009/62) 
 
Introduction and legal basis  
On 3 July 2009 the European Central Bank (ECB) recei ved a request from the Spanish State Secretary for 
Economic Affairs for an opinion on Royal Decree-La w 9/2009 of 26 June 2009 on bank restructuring and 
reinforcement of credit institution’s own funds  (hereinafter ‘the Royal Decree-Law’).  
The ECB’s competence to deliver an  opinion is based on Article 105(4) of the Treaty establishing the 
European Community and on the third and sixth indent s of Article 2(1) of Council Decision 98/415/EC of 
29 June 1998 on the consultation of the European Ce ntral Bank by national authorities regarding draft 
legislative provisions1, as the Royal Decree-Law relates to the Banc o de España and to rules applicable to 
financial institutions insofar as they materially influe nce the stability of financial institutions and markets. 
In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central 
Bank, the Governing Council has adopted this opinion. 
 1.  Purpose of the Royal Decree-Law 
The Royal Decree-Law is motivated by the ongoing financ ial market crisis and by the need for an ordered 
restructuring of the Spanish banking system to a void potential systemic risks, thus maintaining 
confidence in the national financial system and enhanc ing its strength and solvency. This ensures that the 
institutions that remain are solid and can provide credit as usual.    
The restructuring model is based on the three existing deposit guarantee schemes and on the use of a new 
ad hoc institution: the Fund for Ordered Bank Restruct uring (hereinafter the ‘FROB’). In a first phase, an 
action plan will be adopted in the context of the de posit guarantee schemes. If such action plan fails, a 
second phase will start with intervention by the FROB . The FROB will temporarily replace the directors 
of the affected institution and will submit a restructuri ng plan to the Banco de España aimed at a merger 
with another institution or at an ove rall or partial transfer of assets and liabilities to another institution. 
The FROB may grant funding to the affected institution or acquire its assets or shares. It may also support 
inter-institutional integration processes by acquiring secu rities, subject to buy back, issued by two or 
                                                 
1  OJ L 189, 3.7.1998, p. 42.  
2 more credit institutions in the context of an inte gration plan submitted to the Banco de España. The 
FROB may secure additional funding on the securities ma rkets by issuing fixed-rate securities with a 
State guarantee. Finally, it may also support restructuring plans by granting funding to the deposit guarantee schemes. 
 2. General observations  2.1 The Spanish Government has already adopted and published the Royal-Decree Law on an urgent 
basis, thus giving it normative effects, and the Spanish Parliament has already validated it. 
Therefore, this opinion relates to any further le gislative amendments to the Royal-Decree Law and 
to its subsequent implementation.  
2.2 The ECB reminds the Spanish authorities of their obligation under Article 4 of Decision 98/415/EC 
to ensure the effective compliance with their duty to consult the ECB, in particular by consulting it 
at an appropriate stage in the law-making process.   
2.3 The ECB understands that implementing rules will complete the details of the Royal Decree-Law
2. 
Consequently, the ECB expects to be consulted on any proposed implementing legislation to be 
adopted under the Royal Decree-Law that materially  influences the stability of financial institutions 
and markets3. 
2.4 The ECB has issued a number of opinions at the re quest of the Spanish authorities and also other 
Member State authorities on national measures adopt ed in response to the global financial crisis4. 
The ECB invites the Spanish State Secretary for Economic Affairs to  take into account observations 
made in its recent opinions on similar draft legislative provisions in other Member States. In particular, the ECB refers to the importance of th e guidance provided by the Ecofin Council to the 
Member States in the conclusions of its Meeting of 7 October 2008
5 as well as the Declaration 
issued by the Heads of State of the euro area on 12 October 2008 (hereinafter the ‘Declaration’)6. In 
particular, the ECB emphasises that any initia tives put in place by the competent national 
authorities to restore confidence in the financial markets should be coordinated and should aim to 
                                                 
2  See the seventh final provision of the Royal Decree-Law. 
3  See the definition of ‘draft legislative provisions’ under Article 1(1) and also the sixth indent of Article 2(1) of Decision 
98/415/EC. 
4  All ECB opinions are available on th e ECB’s website at www.ecb.europa.eu. 
5  See ‘Immediate Responses to Financial Turmoil’, Ecofin Council Conclusions of 7 October 2008, available on the former 
French Presidency’s website at www. ue2008.fr. The Ecofin Council recommended that: (i) interventions should be 
timely and the support should in pr inciple be temporary; (ii) the interests of taxpayers should be protected; (iii) existing 
shareholders should bear the due conseque nces of the intervention; (iv) the Gove rnment should be in a position to bring 
about a change of management; (v) management should not retain undue be nefits; (vi) governments may have, inter alia , 
the power to intervene in remuneration; (vii) legitimate intere sts of competitors must be protected, in particular through 
the State aid rules; and (viii) negative spill-over effects should be avoided.  
6  The text of the Declaration is available on the former Fren ch Presidency’s website at www. ue2008.fr. The Member States 
agreed to: (i) ensure appropriate liquid ity conditions for financial institutions; (ii) facilitate the funding of banks; 
(iii) provide financial institutions with additional capital resources to continue to ensure the proper financing of the 
economy; (iv) allow for an efficient recapitalisation of distressed banks; (v) ensure su fficient flexib ility in the 
implementation of accounting rules; and (vi) enhance cooperation procedures am ong European countries. 
3 implement the common principles in question, in a spirit of close cooperation with other Member 
States and the Community institutions7. The principles contained in the Declaration, as well as the 
conclusions raised by the Ecofin Council, we re endorsed by the European Council of 15 and 
16 October 20088. Moreover, measures taken by competen t national authorities in relation to 
financial institutions in the context of the current gl obal financial crisis have  been subject to further 
coordination at European Union level9. As a general remark in this context, the ECB, in line with its 
previous opinions10, notes the importance of putting a transp arent and predictable framework in 
place by defining the terms and conditions for financ ial institutions to have recourse to it and the 
parameters of and limitations to the exercise by the authorities of their powers when deciding whether to apply such aid measures. 
 
3. Specific comments  
3.1 The Banco de España’s financial role 
From Article 2(6) of the Royal Decree-Law the ECB understands that the Banco de España would 
be solely responsible for the FROB’s cash service subject to a specific ag reement. The ECB expects 
that the Banco de España’s fi nancial involvement will not go be yond the agent function and, in 
particular, that it will fully comply with the prohibition on monetary financing laid down in the 
Treaty.   
3.2 Recapitalisation scheme 
In line with the abovementioned general observations,  the ECB recalls that recapitalisation 
measures in the Member States should be ai med at strengthening the capital position of 
fundamentally sound financial in stitutions to improve the functioning and stability of the banking 
system and to ensure the proper financing of the economy. In particular, there should be a 
consistent approach to defining the conditions  for recapitalisations and the pricing of the 
instruments intended to provide Tier 1 capital to financial institutions. The ECB underlines the 
importance of appropriate pricing for recapitalisations  with a view to enhancing the stability of the 
financial system, facilitating a return to normal market conditions, ensuring a level playing-field 
and the proper financing of the economy.  
                                                 
7  See Opinion CON/2009/12. 
8 See Brussels European Council of 15 to 16 October 2008, paragraph 3 of the Presidency Conclusions. 
9  Communication from the Commission — The application of State aid rules to meas ures taken in relation to financial 
institutions in the context of the current global financia l crisis (OJ C 270, 25.10.2008, p. 8); Communication from the 
Commission — The recapitalisation of fina ncial institutions in the current financial crisis: limitation of aid to the 
minimum necessary and safeguards ag ainst undue distortions of compe tition (OJ C 10, 15.1.2009, p. 2);  
Recommendations of the Governing Council of the European Central Bank on government gua rantees for bank debt and 
Recommendations of the Governing Council of the European Ce ntral Bank on the pricing of recapitalisations, both latter 
documents are available on the ECB’ s website at www.ecb.europa.eu.  
10  See paragraph 3.1.2 of Opinion CON/2009/18. 
4  Against this background, the recommendations of  the ECB’s Governing Council on the pricing of 
recapitalisations11 have been published. The ECB highlight s that the pricing conditions for capital 
support should be risk-based and market-oriente d, determined on the basis of the costs of a 
corresponding guarantee in the market by taking in to consideration the specific risk of both the 
specific instrument chosen for in jecting capital and the institution concerned. Specific features of 
the instruments for capital injecti ons, such as preference shares, shoul d be appropriately chosen so 
that, while encouraging an early end to the Stat e’s capital support of banks, they should not result 
in an excessive increase in the cost of capital.  
3.3 Temporary nature of the scheme  
 In line with the previous general considerations , harmonisation of the expiry of national financial 
support schemes throughout the EU, and in particular within the euro area, is of crucial importance, 
including in relation to State capital investments in financial institutions. In the same vein, the 
Declaration clearly draws attention to the need for any national support scheme to be temporary in 
nature, even if it may be extended or renewed. In this respect, specific provisions on time limits in 
relation to bank restructuring and reinforcement of credit institutions’ ow n funds under the Royal 
Decree-Law should be adopted and clearly specified12. 
 This opinion will be published on the ECB’s website.   Done at Frankfurt am Main, 22 July 2009. 
 
[signed] 
 
The Vice-President of the ECB 
Lucas D. PAPADEMOS 
 
                                                 
11 
 Recommendations of the Governing Council of the European Ce ntral Bank on the pricing of recapitalisations, issued on 
20 November 2008 and available on the ECB’s website at www.ecb.europa.eu. 
12  See paragraph 3.5 of Opinion CON/2008/76 or paragraph 3.2 of Opinion CON/2009/6.