EN 
 
 
OPINION OF THE EUROPEAN CENTRAL BANK 
of 17 October 2008  
at the request of the Spanish State Secretary for Economic Affairs 
on a Royal Decree-Law creating a Fund for the acquisition of financial assets and on a Royal 
Decree-Law adopting urgent financial and eco nomic measures in relation to the concerted 
European action plan of the euro area countries 
(CON/2008/52) 
 
Introduction and legal basis  
On 13 October 2008 the European Central Bank (E CB) received a request from the Spanish State 
Secretary for Economic Affairs for an opinion on a Royal Decree-Law creating a Fund for the acquisition 
of financial assets (hereinafter ‘Royal Decree-Law 1’). On 15 October 2008 the ECB received from the 
Spanish State Secretary for Economic Affairs a rela ted request on a Royal Decree-Law adopting urgent 
financial and economic measures in relation to the concerted action plan of the euro area countries1 
(hereinafter ‘Royal Decree-Law 2’ and ‘concerted European action plan’ respectively). This opinion 
covers both Royal Decree-Laws. A Royal Decree modifying the guarantees pr ovided for Spanish deposit 
and investment schemes was submitted only for information purposes.  
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 provisions2, as the Royal Decree-Laws relate to Banco de  España and to the 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-Laws 
Royal Decree-Law 1 is motivated by  the current financial market crisis and by the Spanish authorities’ 
concern to foster financing to companies and households
3. For this purpose, Royal Decree-Law 1 
establishes a fund that will be used to acquire from financial institutions top quality assets on a voluntary 
basis and subject to market criteria. The Fund will receive from the State budget an initial provision of 
                                                 
1  Declaration on a concerted European action plan of the eu ro area countries, available on the website of the French 
Presidency at www.eu2008.fr. 
2  OJ L 189, 3.7.1998, p. 42.  
3  See the first paragraph of the preamble to Royal Decree-Law 1.  
2 EUR 30 billion extendable to up to EUR 50 billion4. The Fund will be managed by the Ministry for 
Economic Affairs and Finance, which will estab lish the Fund’s Executive Council and its Executive 
Committee5. Moreover, Royal Decree-Law 2 seeks to implement the outcome of the Declaration on a 
concerted European action plan of the euro area countries in facilitating the funding of banks, while 
taking into account the situation of the Spanish fi nancial system and the measures already adopted in 
Royal Decree-Law 1. To this end, Royal Decree-Law 2 authorises State guarantees of new financing operations by credit institutions with a maximum matu rity of five years, 31 December 2009 as the time 
limit for granting such guarantees and EUR 100 billion as the maximum covered amount for 2008
6.    
 2. General observations  2.1 The Spanish Government has already adopted and published the Royal-Decree Laws on an urgent 
basis, thus having already normative effects. Ther efore, this opinion relates to the parliamentary 
discussion in the validation phase of the Royal Decree -Laws, any further legislative amendments to 
them and to their subsequent implementation. 
2.2 The ECB notes that the conclusions adopted at the Ecofin meeting on 7 October 2008 highlighted 
common principles to guide the States’ action, namely  that (i) interventions should be timely and 
the support should in principle be temporary; (ii) th e interests of taxpayers should be protected; (iii) 
existing shareholders should bear the due conseque nces of the intervention; (iv) the Government 
should be in a position to bring a bout a change of management; (v ) management should not retain 
undue benefits; (vi) governments may have, inter alia , the power to intervene in remuneration; (vii) 
legitimate interest of competitors must be protect ed, in particular through the State aid rules, and 
(viii) negative spillover effects should be avoided
7. Moreover, the ECB notes that in the concerted 
action plan of 12 October 2008 the Heads of State of the euro area agreed on common principles to be followed by the EU and euro area governments,  central banks and superv isors to avoid national 
measures adversely affecting the functioning of the single market and the other Member States. The ECB highlights that all the initiatives put in place by national governments to restore confidence in 
financial markets should be aimed at implementing such common principles, in the spirit of close 
cooperation with other Member St ates and EU institutions.   
2.3 Against this background, the ECB notes that Royal Decree-Law 1, to be in line with one of the 
conclusions of the Ecofin meeti ng on 7 October 2008, namely that the support should be temporary, 
should contain an expiry date. Although the refere nces in the preamble of the Royal Decree-Law 1 
to the temporary nature of the scheme and to the Budget Law of 2009 indicate that the scheme will 
                                                 
4  See Articles 1(1) and 2(1) of Royal Decree-L aw 1 and the fourth paragraph of its preamble.  
5  The Executive Council will cons ist of the Minister for Economic Affairs and Finance as Chair, the State Secretary for 
Economic Affairs, the State Secretary for Finance and the Budge t, the President of the Instituto de Crédito Oficial, the 
Attorney General and the Auditor General. See Article 3(1) to (2) of Royal Decree-Law 1. 
6           See Article 1 of Royal Decree-Law 2. 
7  See the press release of the 2894t h Council meeting (13784/08), availa ble on the Council’s website at 
www.consilium.europa.eu. 
3 not go beyond 20098, a clear time limit would dissipate any expectation that the scheme is 
permanent. 
2.4 The ECB draws the consulting authority’s attention to the Declaration of Paris where it says in 
point (8) that Member States’ actions‘ taken to facilitate the funding of banks ‘will be designed in 
order to avoid any distortion in the level play ing field’, which is a crucial element for the 
integration of the financial markets in Europe. And further, that ‘all the financial institutions 
incorporated and operating in [euro area countries ] and subsidiaries of foreign institutions with 
substantial operations will be e ligible’ to benefit from States’ actions. The ECB welcomes the fact 
that Royal Decree-Law 1 does not discriminate be tween credit institutions established in Spain. 
However, the ECB notes that Royal Decree-Law 2, namely in Article 1(1), could be considered as allowing for different treatment of some EU credit institutions established in Spain, with a potential 
disruption of the level playing field within the internal market. The ECB has stated in other 
opinions that ‘arrangements that may be seen as providing preferential treatment to specified 
institutions should be avoided’
9.  
2.5 The ECB understands that implementing rules w ill complete the details of the Royal Decree-
Laws10. Consequently, the ECB expects to be cons ulted on any proposed implementing legislation 
to be adopted under the Royal Decree-Laws that materially influences the stability of financial 
institutions and markets11. 
 3. Specific comments 3.1 Eligibility for support 
The ECB notes that: (i) the Fund will use comp etitive procedures to sel ect assets and make 
acquisitions in accordance with the usual financ ial market mechanisms to perform its operations
12; 
and (ii) the financial instruments in which the Fu nd will invest will be of the highest quality and 
determined by the Fund’s Executiv e Committee in accord ance with the criteria established by the 
Fund’s Executive Council and in all cases resp ecting the principles of objectivity, security, 
transparency, efficiency, profitability and diversification13. The ECB welcomes the above 
provisions, as  financial support arrangements whic h may be considered as providing preferential 
treatment of specified credit institutions should be avoided14. The ECB further draws the consulting 
                                                 
8  See also the third and sixth paragraphs of the preamble to Royal Decree-Law 1. 
9  ECB Opinion CON/2008/48 of 15 October 2008 at the request of the Irish Minister for Finance on a draft Credit 
Institutions (Financial Support) Scheme 2008. All E CB opinions are available on the ECB’s website at 
www.ecb.europa.eu. 
10  See, e.g. ‘investment guidelines’ to be adopted by the Fund’s Executive Coun cil under Article 3(3)(1) of Royal Decree-
Law 1. See also Article 1(4)  of Royal Decree-Law 2. 
11  See definition of ‘draft legislative pr ovisions’ under Article 1(1) and also the si xth indent of Article 2(1) of Decision 
98/415/EC. 
12  See 4(2) of Royal Decree-Law 1. 
13  See 4(3) of Royal Decree-Law 1. 
14  See ECB Opinion CON/2008/48. 
4 authority’s attention to the r ecently adopted Commission’s guidance on compliance by the financial 
sector support schemes with EU State aid rules15, which includes in the specific context of 
provision of State guarantees detailed rules on se tting the eligibility criteria for the beneficiary 
institutions16. In this context, the ECB recommends clarifying in Royal Decree-Law 2 that it 
ensures compliance with the requirements of EU State aid and competition law and that regulatory and supervisory measures will be undertaken to ensu re that the beneficiary institutions will not be 
unfairly advantaged by making undue use of their guar anteed status to engage in a heightened level 
of activities which create market distortions and facilitate abnormal balance sheet growth
17. In this 
regard, the ECB underlines the importance of est ablishing appropriate safeguards such as for 
example limits to marketing of fi nancial products or limits to expa nsion of activities on the basis of 
the State guarantees. 
3.2 Role of the central bank 
 The ECB understands that the Fund will be mana ged by the Ministry for Economic Affairs and 
Finance, and that the role of Banco de España in relation to the Fund will be limited to: (i) acting as 
an instrument for the Fund’s financial operations  of the Fund in its capacity as agent to the 
Government and deposit bank18; and (ii) providing expert advice to the Fund’s Executive 
Committee19. The ECB appreciates that the above provisions recognise the Banco de España’s 
expertise relevant to the operation of the Fund.  Moreover, the ECB notes that the Banco de 
España’s involvement with the Fund must be compatible with the Treaty. First, the ECB 
understands from Royal Decree-Law 1 that Banco de España will only play the role of fiscal agent. 
Therefore, the ECB expects that functions to be performed by Banco de España for the benefit of 
the Fund will be conducted in a manner fully compa tible with Banco de Espa ña’s institutional and 
financial independence, as a safeguard for the pr oper performance of the Ba nco de España’s tasks 
under the Treaty and the Statute of the European System of Central Banks and of the European Central Bank. Second, the ECB also understands th at the Fund’s resources will be financed through 
public debt issuance and that the Fund will finance its own management costs
20. It is therefore 
expected that the involvement of Banco de Espa ña will not go beyond the agent function and, in 
particular, that it will fully comply with the pr ohibition on monetary fina ncing laid down in the 
Treaty. 
                                                 
15  See ‘Communication from the Commission – The application of St ate aid rules to measures ta ken in relation to financial 
institutions in the context of the current global financ ial crisis’ of 13 October 2008, available on the Commission’s 
website at www.ec.europa.eu. 
16   See paragraph 18 of the Commission’s guida nce, specifying that ‘The eligibility criteria of financial institutions … must 
be objective, taking due acco unt of their role in the relevant banki ng system and the overall economy, and non-
discriminatory so as to avoid undue distortive effects on ne ighbouring markets and the intern al market as a whole. In 
application of the principle of non disc rimination on the grounds of nationality, all institutions incorporated in the 
Member State concerned, including subsidiaries, and with si gnificant activities in that Me mber State should be covered 
by the scheme’. 
17  See for instance ECB Opinion CON/2008/48. 
18  Article 4(5) of Royal Decree-Law 1. 
19  Article 3(6) of Royal Decree-Law 1; seventh paragraph of the preamble to Royal Decree-Law 1. 
20  Article 2(3) and (4) of Royal Decree-Law 1. 
5 3.3     State guarantees and the prohibition on monetary financing  
 In addition, the ECB reminds the Spanish auth orities that compliance of the State guarantee 
arrangements with the monetary financing prohibition laid down in the Treaty needs to be ensured. 
It should be noted in this context that the Fund  will qualify as a ‘public undertaking’ within the 
meaning of Article 101(1) of the Treaty, since th e State will exercise dominant influence over the 
Fund by controlling its financial resources and governing bodies21. As a result, the ECB notes that, 
to ensure compliance with the monetary financing prohibition, the Fund may not benefit from overdraft facilities or any type of credit facility with the Banco des España in accordance with 
Regulation (EC) No 3603/93.  
3.4 The scheme’s relationship with the si ngle monetary policy of the euro area  
 The ECB notes that, in line with the concerted actio n plan, Member States must act in a coordinated 
manner to avoid significant differences in national implementation from having a counter-
productive effect and creating distortions in global banking markets. The concerted action plan also 
acknowledges the need to work in cooperation w ith the ECB to ensure consistency with the 
Eurosystem’s management of liquidity and comp atibility with its operational framework. Against 
this background, the ECB notes that uncoordinated decisions among Member States should be avoided as they may involve a fragmentation of the euro area money market.  
 First, the ECB notes that, under Royal Decree-Law 1, the Fund will acquire top quality assets from 
financial institutions, giving priority to assets backed  by new credit that could be granted later than 
7 October 2008. In this respect, the ECB makes the following observations which are important 
from the monetary policy perspective. Although su ch measures should restore confidence in the 
Spanish banking system, it is important that they are taken in a coordinated manner, that the pricing 
of assets is determined by market conditions (e .g. through auction procedures) and that the 
transactions conducted by the Fund do not interfere w ith the transmission of the monetary policy of 
the Eurosystem. 
 Second, the ECB considers that extending the St ate guarantees to cover interbank deposits should 
be avoided. It could entail a substantial distorti on in the various national segments of the euro area 
money market by potentially increasing short-term debt issuance activity across Member States and 
therefore impairing the implementation of the si ngle monetary policy, which is an exclusive 
Eurosystem competence under Article 105(2) of the Treaty. In this context, the ECB attaches the 
utmost importance to Article 1(2) of Royal Decr ee Law 2 that provides that any State guarantee for 
interbank deposits will only be issued ‘within a concerted and coordinated framework of euro area 
Governments’. It also appears crucial to ensure the harmonisation of the pricing of such guarantee 
within the euro area and the EU, as a level playin g field is of essence. The ECB should be involved 
in such concertation and coordination, and woul d welcome an explicit provision for this in any 
subsequent legislation.  
                                                 
21  See the classifications of ‘public undertaking’ in Article 8(1) of Council Regulation (EC) No 3603/93 of 
13 December 1993 specifying definitions for the application of the prohibitions referred to in Articles 104 and 104b(1) of 
the Treaty (OJ L 332, 31.12.1993, p. 1). 
6 3.5 Recapitalisation of credit institutions  
 The ECB notes that Royal Decree-Law 2 provides the Minister for Economic Affairs and Finance 
with the temporary power until 31 December 2009 to acquire securities issued by credit institutions to reinforce their own resources, including preference shares and participations
22. The ECB again 
draws attention to the common principles adopted at the Ecofin meeting on 7 October 2008 and in 
particular to the need to ensure that sharehol ders and management bear the due consequences of 
intervention. Against this background, the ECB w ould suggest that the Minister consider setting 
specific terms to maximise the potential benefits  for taxpayers along those common principles. 
 This opinion will be published on the ECB’s website.   Done at Frankfurt am Main, 17 October 2008. 
 
[signed] 
 
The President of the ECB 
Jean-Claude TRICHET 
   
                                                 
22  Article 2 of Royal Decree-Law 2.