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 economic measures in relation to the concerted European action plan of the euro area countries (CON/2008/52)
Date: 2008-10-17
Institutions: European Central Bank
Subjects: Spain, State aid, financial aid, financial stability, national law, public institution

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 economic 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  (ECB)  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 related 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 provided 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 indents of Article 2(1) of Council Decision 98/415/EC of 

29 June  1998  on  the  consultation  of  the  European  Central  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 influence 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  households3.  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  

2  
3  

Declaration  on  a  concerted  European  action  plan  of  the  euro  area  countries,  available  on  the  website  of  the  French 
Presidency at www.eu2008.fr. 

OJ L 189, 3.7.1998, p. 42.  
See the first paragraph of the preamble to Royal Decree-Law 1.  

 
 
 
 
                                                 
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  establish  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  financial  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 maturity of five years, 31 December 2009 as the time 
limit for granting such guarantees and EUR 100 billion as the maximum covered amount for 20086.    

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.  Therefore,  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) the interests of taxpayers should be protected; (iii) 

existing  shareholders  should  bear  the  due  consequences  of  the  intervention;  (iv)  the  Government 

should be in a position to bring about 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 protected, in particular through the State aid rules, and 
(viii) negative spillover effects should be avoided7. 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 supervisors 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 States 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 meeting on 7 October 2008, namely that the support should be temporary, 

should contain an expiry date. Although the references 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  
5  

See Articles 1(1) and 2(1) of Royal Decree-Law 1 and the fourth paragraph of its preamble.  
The Executive Council will consist of the Minister for Economic Affairs and Finance as Chair, the State Secretary for 
Economic Affairs, the State Secretary for Finance and the Budget, 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  2894th  Council  meeting  (13784/08),  available  on  the  Council’s  website  at 
www.consilium.europa.eu. 

2 

 
                                                 
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  playing  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 eligible’ to benefit from States’ actions. The ECB welcomes the fact 

that  Royal  Decree-Law  1  does  not  discriminate  between  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  will  complete  the  details  of  the  Royal  Decree-
Laws10. Consequently, the ECB expects to be consulted 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  competitive  procedures  to  select  assets  and  make 
acquisitions in accordance with the usual financial market mechanisms to perform its operations12; 

and (ii) the financial instruments in which the Fund will invest will be of the highest quality and 

determined by the Fund’s Executive Committee in accordance with the criteria established by the 

Fund’s  Executive  Council  and  in  all  cases  respecting  the  principles  of  objectivity,  security, 
transparency,  efficiency,  profitability  and  diversification13.  The  ECB  welcomes  the  above 

provisions, as  financial support arrangements which may be considered as providing preferential 
treatment of specified credit institutions should be avoided14. The ECB further draws the consulting 

8  
9  

10  

11  

12  
13  
14  

See also the third and sixth paragraphs of the preamble to Royal Decree-Law 1. 

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  ECB  opinions  are  available  on  the  ECB’s  website  at 
www.ecb.europa.eu. 
See, e.g. ‘investment guidelines’ to be adopted by the Fund’s Executive Council under Article 3(3)(1) of Royal Decree-
Law 1. See also Article 1(4) of Royal Decree-Law 2. 
See  definition  of  ‘draft  legislative  provisions’  under  Article  1(1)  and  also  the  sixth  indent  of  Article  2(1)  of  Decision 
98/415/EC. 
See 4(2) of Royal Decree-Law 1. 
See 4(3) of Royal Decree-Law 1. 
See ECB Opinion CON/2008/48. 

3 

 
                                                 
authority’s attention to the recently 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  setting  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 ensure that the beneficiary institutions will not be 

unfairly advantaged by making undue use of their guaranteed status to engage in a heightened level 
of activities which create market distortions and facilitate abnormal balance sheet growth17. In this 

regard,  the  ECB  underlines  the  importance  of  establishing  appropriate  safeguards  such  as  for 

example limits to marketing of financial products or limits to expansion of activities on the basis of 

the State guarantees. 

3.2  Role of the central bank 

The  ECB  understands  that  the  Fund  will  be  managed  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 compatible with Banco de España’s institutional and 

financial independence, as a safeguard for the proper performance of the Banco 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 that the Fund’s resources will be financed through 
public  debt  issuance  and  that  the  Fund  will  finance  its  own  management  costs20.  It  is  therefore 

expected that the involvement of Banco de España will not go beyond the agent function and, in 

particular,  that  it  will  fully  comply  with  the  prohibition  on  monetary  financing  laid  down  in  the 

Treaty. 

15  

16   

17  
18  
19  
20  

See ‘Communication from the Commission – The application of State aid rules to measures taken in relation to financial 
institutions  in  the  context  of  the  current  global  financial  crisis’  of  13  October  2008,  available  on  the  Commission’s 
website at www.ec.europa.eu. 
See paragraph 18 of the Commission’s guidance, specifying that ‘The eligibility criteria of financial institutions … must 
be  objective,  taking  due  account  of  their  role  in  the  relevant  banking  system  and  the  overall  economy,  and  non-
discriminatory  so  as  to  avoid  undue  distortive  effects  on  neighbouring  markets  and  the  internal  market  as  a  whole.  In 
application  of  the  principle  of  non  discrimination  on  the  grounds  of  nationality,  all  institutions  incorporated  in  the 
Member State concerned, including subsidiaries, and with significant activities in that Member State should be covered 
by the scheme’. 
See for instance ECB Opinion CON/2008/48. 

Article 4(5) of Royal Decree-Law 1. 
Article 3(6) of Royal Decree-Law 1; seventh paragraph of the preamble to Royal Decree-Law 1. 
Article 2(3) and (4) of Royal Decree-Law 1. 

4 

 
                                                 
3.3     State guarantees and the prohibition on monetary financing 

In  addition,  the  ECB  reminds  the  Spanish  authorities  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 the 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 single monetary policy of the euro area 

The ECB notes that, in line with the concerted action 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  with  the  ECB  to  ensure  consistency  with  the 

Eurosystem’s  management  of  liquidity and  compatibility  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  such  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 with the transmission of the monetary policy of 

the Eurosystem. 

Second, the ECB considers that extending the State guarantees to cover interbank deposits should 

be avoided. It could entail a substantial distortion 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  single  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 Decree 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 playing field is of essence. The ECB should be involved 

in  such  concertation  and  coordination,  and  would  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). 

5 

 
 
 
 
                                                 
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 participations22. 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  shareholders  and  management  bear  the  due  consequences  of 

intervention.  Against  this  background,  the  ECB  would  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. 

6