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COMMISSION
OFTHE
EUROPEAN COMMUNITIES
GeneralSecretariat
NEGOTIATIONS FORTHEACCESSION OFSPAIN
Rightofestablishment andfreedom
toprovideservices
Bankingandinsurance
Commission Communication totheCouncil
C0M(82)54final

INTRODUCTION
FollowingtheCommunity'sstatementon1FebruaryI98O,the
Spanishdelegation madeanumberofstatementspresentingand
clarifyingitspositionregardingproblemsarisinginconnection
2withrightofestablishment andfreedomtoprovideservices..
InresponsetotheSpanishstatements,theCommunityinturn
requestedfurtherinformationorclarification^.
OnthebankingandinsurancesectortheSpanishdelegationhasnow
clearlyspecifiedthenatureandscopeofitsrequestsinconnection
withadoptionoftheacquiscommunautaire .
However,ithasnotsofarprovidedthedetailsofitsotherrequests.
TheCommissionproposalswhichfollowarethereforeconfinedtothe
hankingandinsurancesector.Proposalsontheotherissuesfalling
withinthischapterwillfollowassoonastheSpanishdelegation
hasforwardedthenecessaryinformation. ^
^0p>"^-E/i:l/80,CONF-E/65/8O,CONF-E/5/8I,CONF–E/12/81jCONF-E/32/8I,^OlIF-E/40/81,CONF-E/58/8I.
CONF-E/42/8O,CONF-E/22/8I.

I.BANKS
TheSpanishdelegationhasmadeanumberofstatements ,whichinclude
thefollowingpoints.
1.TheSpanishdelegationagreestoapplyasfromaccesstheacquis
communautaire regardingrightofestablishment andfreedomtoprovide
servicesinrespectoftanks.
AsregardsthescopeofDirective7^780oncreditinstitutions ,the
Commissionnotesthatagreementwasreachedatthenegotiating conference
toexcludetheInstitutodeCreditoOficial,thoughnotitssubsidiaries ,
fromthefieldofapplication ofthisdirective.
2.However,theSpanishdelegationconsidersthattemporaryderogations
ortransitional measureswill"benecessaryontwopoints:
(i)Maintainingthe"eonomicneedsofthemarket"criterionduringa
lengthytransitionperiodfortheauthorization tooperateneeded
"bycreditinstitutions .
(ii)Maintainingspecialoperatingrulesforsubsidiaries and"branches
offoreign "banks:
amaximumofthreeoffices;
financingobtainedfromthepublicgenerallyontheSpanish
domesticmarketislimitedtoZ^Ofoofinvestmentsinsecurities
saidcreditsinSpanishconcerns.
Initsstatements,andincontactsattechnicallevelwiththeCommission
departmentsconcerned,theSpanishdelegationhaspresentedandexplained
thereasons -underlyingitsrequests.Inthelightoftheinformation
submittedtoit,theCommissionisnowinapositiontoputforwardits
viewsandproposals.
A.TheEconomicneedcriterion
TheDirectiveof12December1977providesthatwherethelaws,
regulations oradministrative provisionsofaMemberStateprovide,at
thetimeofnotification ofthedirective,thattheeconomicneedsof
themarketshall "beaconditionofauthorization andwheretechnicalor
structuraldifficulties inits"bankingsystemdonotallowittogiveup
oGQNF-E/l1J80,CONF-E/65/80,C0NF-E/12/81,CONF-E/40/8I,CONF-E/58/8I.FirstCouncilDirectiveof12December1977on"thecoordinationoflaws,regulationsandadministrative provisionsrelatingtothetakingupand
3Ele (0JL322/?7'17DeC6mber1977'P-3°>-

thecriterionwithintwoyears,theStatemquestionmaycontinueto
applythecriterionforaperiodofsevenyearsfromnotification .
Thisperiodisto"beextendedbyfiveyearsunless,inthemeantime,
theCouncil,actingunanimously onproposalsfromtheCommission,adopts
adecisiontoterminatetheapplication ofthecriterion.
Giventhedateonwhichthedirectivewasadopted,theinitialperiod
willexpireattheendof1984andafurtherfiveyearswilltakeus
uptotheendof1989,unlesstheCouncilhasadoptedaunanimous
decision.
TheCommissionhasgivencarefulattentiontotheargumentsputforward
"bytheSpanishdelegationformaintaining theeconomicneedcriterion
overalengthytransitional period.-
ByadecreepassedinJune1978^,theSpanishGovernmentauthorized
foreignhankstooperateinSpain,subjecttocertainrestrictions .
Thisopeningupofaccessconstitutes oneofthemainspurstoreform
oftheSpanishfinancialsystem.
Sofar,twenty-fiveforeign "bankshave"beenauthorizedtooperatein
Spain.Bymid-1981theyaccountedforover6%ofthevolumeofhanking
operations ontheSpanishmarket.Inparticular,theforeign "banks
havetakenasignificantshare-over11%–ofthecreditmarket,and
infactholdover28f0oftheforeigncurrencycreditmarket.
Thesefiguresshowhowquicklyforeign "bankshavepenetratedtheSpanish
market,theyalsoreflecttheinternational natureoftheir"business.
Inaddition ^twoCommunity "bankshaverecently "beenauthorizedtotake
2overSpanish "bankswithanetworkofhighstreet "branches.
^RoyalDecreeI388/78of23June1978,BOENo150of24June1978.
tfarclaysBank–BancodeValladolid
BanqueNationaledeParis-BancoLópezQuesada.

-3-
Theadventoftheforeignbanksoverarelativelyshortspaceoftime,
hasprovidedasharpstimulustomodernization intheSpanish "banking
sector,thankslargelytotheintroduction ofnewtechniques.The
foreigntanksalsoactasacatalystontheinterbankmarket.With
theSpanishGovernmentaimingatanopenandmoreflexibletypeof
economy,theadjustmentsdictatedbythisexposuretocompetitionare
"beneficial.
However,ifstructurechangeintheSpanish "bankingsectoristo"be
acceptableitmust"begradual;forthesamereason,theCommunity
allowedtheMemberStatestomaintaintheeconomicneedcriterionfor
atimeshouldtheysowish.
Commissionproposal
TheCommissionproposesthatSpain"beallowedtoapplytheeconomicneed
criterionforsevenyearsfromthedateofaccession.Thecriterion
willhaveto"beappliedobjectively andinstrictaccordancewiththe
non-discrimination rule.
B.Specificrulesforsubsidiaries and"branchesofforeignbanks
Article7ofRoyalDecree1388/78of23June1978governingtheoperations
offoreignbanksinSpainprovidesthatSpanishbankswhosecapitalis
subscribedbyforeignbanks,andalsobranchesofforeignbanks,shall
begovernedbytherulesapplicabletoSpanishbanksandbythefollowing
specificprovisions :
(a)Theymay'not,exceptwiththeexpressauthorization oftheBankof
Spain,obtainfinancingontheSpanishdomesticmarketfromthe
publicgenerallyinamountsexceeding40$oftheirinvestmentsin
securitiesandcreditsinSpanishconcerns,whetherpublicorprivate,
plustheassetscoveringtheircashratio.

-4-
FinancingobtainedontheSpanishinterbankmarketisexcludedfromthis
restriction .
(b)Theymaynotopenmorethanthreeoffices,,includingthemainoffice.
(c)Theirsecuritiesportfoliomustbeformedexclusivelyofpublicbonds-
andfixed-interest securities.
(d)TheywillbeinspectedannuallybytheBankofSpainforthefirst
fiveyearsoftheirexistence.
TheSpanishdelegationhasalreadystatedthatrules(c)and(d)willbe
abolishedasfromaccessionandthatforeignbankswillonanequalfooting
1withSpanishbanks.
Ithas,however,requestedatemporaryderogationforanasyetunspecified
periodinrespectofrules(a)and(b).
1.Thethree-office limit
(a)Subsidiaries
TheCommission considersthattwofactorsshouldbetakenintoaccountin
assessingthescopeandnatureoftheSpanishdelegation'srequest.
Therequestwouldintroducediscrimination onthegroundsofthenationality
ofshareholders ofcompaniesunderSpanishlaw,indirectcontravention of
thebasicprinciplesembodiedinArticles52to58andArticle221ofthe
EECTreaty.
Spanishbankswithforeignbanksasshareholders wouldbegovernedby
Spanish"bankexpansion"rulesonlywithinthethree-office limit,while
newSpanishbanksjwhosepromotersmustbenaturalpersonsofSpanish
nationality orcompaniesofwhichthemajoritycontrolisinthehandsof
naturalpersonsofSpanishnationalityforatleastthefirstfiveyears,
wouldbeabletodevelopinaccordancewiththenormalrules.Theseprovide
thatnewSpanishbanksmayinitiallyhavenomorethanoneoffice.
CONF-^/58/81,p.13(C).

Aftertwoyears,however,theBankofSpammayauthorizethemtoopen
afurtherofficeeachyearprovidedtheyconformtotherulesgoverning
bankingoperationsinSpain.
Thismeansthataftera(minimum)periodoffouryears,foreignbanks
wouldbeunabletoexpandanyfurther,whileSpanishbankscould.
f
Commission proposal
TheCommissionproposesthattheSpanishdelegation^requestforthenumber
ofoffioestobelimitedtothreeduringatransitional periodbe
rejected.TheCommissionconsidersthatcurrentSpanishlegislation
ontheestablishment ofnewbanksissufficienttoensurethatpenetration
byforeignbankswillbegradualenough,particularly asSpainwillhave
sevenyears–aspreviouslyproposed-duringwhichitcanapplythe
economicneedcriterionasaconditionofauthorization .
In_thècaseofbranchées
Withregardtobranches,theCommissionwishestomakethefollowingpoints:
(i)Article1oftheCouncilDirectiveofDecember 1977definesabranch
asaplaceofbusinesswhichformsalegallydependentpartofacredit
institution andwhichconductsdirectlyallorsomeoftheoperations
inherentinthebusinessofcreditinstitutions ;a,nynumberofbranches
setupinthesameMemberStatebyacreditinstitutionhavingitshead

-6-
office inanother Member State areregarded asasingle branch ,without
prejudice toArticle 4(1)oftheDirective .
Article 4(0provides that Member States maymake thecommencement of
business intheir territory bybranches ofcredit institutions which have
their head office inanother Member State subject toauthorization according
tothe lawandprocedure applicable tocredit institutions established on
their territory .
(ii)Royal Decree 1388/78states that branches aresubject tothesame
rules assubsidiaries offoreign banks .They aretherefore covered by
theprovisions oftheDecree ontheestablishment ofnewSpanish banks ,
inaccordance with the provisions oftheDirective .
They arealso bound bytherules described above governing theexpansion
oftheir commercial network .
Commission proposal
TheCommission proposes that theCommunity agree totheSpanish delegation 's
request that thenumber ofoffices ofcredit institutions having their
head office inanother Member State oftheCommunity belimited tothree
during thetransitional period .
Afive-year temporary derogation would seem tobejustified andreasonable
inview ofSpanish legislation governing theexpansion ofbranch networks .
Itwill ensure equal treatment between branches ofCommunity banks
established prior toaccession andthose established subsequently .
Thedifference oftreatment vis-Sr-visSpanish banks will ,inpractice ,
beslight ,asitwill amount toadelay ofonly oneyear inrelation to
thepresent permissible rate ofexpansion forSpanish banks .

-7-
2.Financingofsubsidiaries and,branchesofforeignfranks
TheSpanishdelegationhasrequestedatemporaryderogationrestricting
to40$oftheirinvestmentsinsecuritiesandcreditstheproportionof
theirfinancingthatsubsidiaries andbranchesofforeignbanksmay
obtainfromthepublicgenerallyontheSpanishdomesticmarket.
TheCommissionconsidersthattheSpanishdelegation'srequest
introduces aconsiderable elementofdiscrimination betweenbankson
theSpanishmarket*Inaddition,giventhenatureofthebusiness
engagedinbysubsidiaries orbranchesofforeignbanks,thelimitation
inquestionwouldnotseemtobejustifiedtechnically.
Commissionproposal
Forthereasonssetoutabove,theCommissionproposesthattherequest
madebytheSpanishdelegationberejected.

II.INSURANCE
TheSpanishrequestsconcerntwopoints:
(i)international co-insurance ,
(ii)motorvehiclecivilliabilityinsurance.
A.International ^£o-insuran£e
Initsstatementatthe12thmeetingoftheConferenceon27April1981,
theSpanishdelegationmaintaineditsearlierrequestforatransitional
arrangementfortheimplementation ofDirective78/473/feECestablishing
coordination measuresrelatingtointernational co–insurance•The
Commission'sreactiontotheadditionalsupportingargumentspresentedby
theSpanishdelegation onthatoccasionisasfollows:aswiththeother
basicdirectiveswhichSpainhasdeclareditselfreadytoimplementas
fromaccession,applicationoftheacquiscommunautaire ininsurance
matterswillundoubtedlyresultinsomerestructuring oftheSpanish
insurancesector*However,contrarytotheSpanishargumentthatthe
directiveonco–insurancewouldleaveinsurancecoverageofmajorrisks
atthemercyofforeigncompanies,theCommissionconsidersthatthe
opportunity openedupforSpanishfirmstoparticipate without
discrimination intheco-insurance ofmajorrisksinotherCommunity
countriesconstitutes aconsiderable advantagefortheinsurancesector
andfortheSpanisheconomyasawhole.
Commissionproposal
Accordingly ,theCommissioncanonlyrecommendthattheCommunitymaintain
itspreviousposition,asreiteratedon16March1981,namelythat
Spainmustapplytherelevantacquiscommunautaire asfromaccession
(CONF-E/22/8I,p.9).
CONF-E/32/8I.

-9-
B.Motbrvehiclecivilliabilityinsurance
TheSpanishdelegationhasaskedthatthesystematpresentinforce
forSpanishvehiclestravellingelsewhereintheterritoryofthe
Communitybemaintainedforthedurationofthetransitionalmeasures^.
Insupportofitsrequest,theSpanishdelegationclaimsthatfull
acceptanceoftheacquiscommunautaire asfromaccessionwouldresultin>
asubstantialriseininsurancepremiums*Itthereforewishestoraise
premiumsgraduallysoastoabsorbprogressively theeffectsof
implementing therelevantdirective.
TheCommissionconsidersthattheSpanishdelegation'sargumentthat
implementation ofthedirectivewouldcausemotorinsurancepremiumsto
riseisunfoundedandhencenotsufficienttojustifyaccordinga
transitional period.
ThesigningbytheSpanishmotorvehicleinsurers'Bureauofthe
supplementary Conventionof12December1973»asrequiredbythedirective,
willleavetheBureau'sfinancialliabilitiesessentially unchanged,as
itatpresentissuesinternational motorvehicleinsurancecertificates
(greencard)forSpanishvehiclestravellinginothercountries;the
BureaumeetsthecostofaccidentscausedbySpanishvehiclesinanother
Stateincaseswheretheownerisinpossessionofagreencard,in
accordancewiththelegislation inforceinthatState,
Theadditional premiumpaidinrespectofvehiclestravellingabroad
will,onimplementation ofthedirective,bedistributed amongall
Spanishdrivers;:itshouldnotresultinasubstantial increasein
insurancepremiums.
SeeinparticularCONF-E/32/81•

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Theabolition ofthegreen card check atthefrontier –themain object
ofthedirective -could result intheSpanish Bureau having tomeet
certain newcosts ,aseither theBureau orthe .Spanish guarantee fund
will heobliged tomeet the cost ofdamage caused byuninsured Spanish
vehicles orSpanish vehicles onwhich theinsurance hasexpired .However ,
thenumber ofSpanish vehicles travelling abroad isrelatively small in
relation tothenumber ofvehicles ontheroad inSpain ;inaddition ,
thepercentage ofsuch vehicles which might beuninsured andmight elude .
insurance checks would bevery small ,while thepercentage ofthese
vehicles which might bethe cause ofanaccident abroad would besmaller
still *
Inshort ,itwould seem tobeunjustified totalk ofasubstantial increase
intheSpanish Bureau 'sliabilities ,leading toasteep increase in
insurance premiums ,asclaimed bytheSpanish delegation .
Commission proposal
TheCommission proposes that theSpanish delegation 'srequest fora
transitional period fortheadoption bySpain ofDirective 72/166onmotor
vehicle civil liability insurance berejected .
Aswasindicated ,however ,intheCommission staff paper of13February 1981
onright ofestablishment ,practical steps canbetaken toenable Spain
toimplement thedirective .
TheCommission considers that ,while maintaining therequirement that the
green card check .atfrontiers beabolished ,itwould bepossible -fora
five-year period –forthepossession ofagreen card tobecompulsory
only forowners ofSpanish vehicles entering another Member State ofthe
Community .Inreturn theSpanish Bureau ortheSpanish -guarantee fund
would undertake tomeet thecost ofanydamage caused byaSpanish vehicle ,
whether ornotcovered byagreen card ,ontheterritory ofother Member
States oftheCommunity .
Ontheexpiry ofthefive-year period ,allSpanish vehicles would have to
beinsured inaccordance with theprovisions ofDirective 72/I66/EEC.
SEC(81)250