Opinion of the European Central Bank of 2 December 2008 at the request of the Spanish State Secretary for Economic Affairs on a draft royal decree on the arrangements for paying the Banco de España’s profits to the Treasury (CON/2008/82)
Date: 2008-12-02
Institutions: European Central Bank
Subjects: Spain, Treasury, central bank, profit

EN 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 2 December 2008  

at the request of the Spanish State Secretary for Economic Affairs 

on a draft royal decree on the arrangements for paying the Banco de España’s profits to the 

Treasury 

(CON/2008/82) 

Introduction and legal basis 

On  5  November  2008  the  European  Central  Bank  (ECB)  received  a  request  from  the  Spanish  State 

Secretary for Economic Affairs for an opinion on a draft Royal decree on the arrangements for paying the 

Banco de España’s profits to the Treasury (hereinafter the ‘draft decree’). 

The  ECB’s  competence  to  deliver  an  opinion  is  based  on  Article  105(4)  of  the  Treaty  establishing  the 

European Community and the third indent 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 
provisions1, as the draft decree relates to the Banco de España. 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 draft decree 

The draft degree is intended to improve the operation and legal certainty of the current payment scheme 

by  deferring  the  first  payment  of  the  Banco  de  España’s  profits  to  December  and  giving  the  scheme 

unlimited validity now that the ECB’s transitional period regarding the provisions on monetary income 
distribution2 is over. 

2. 

General observations  

Spain  has  consulted  the  ECB  on  the  arrangements  for  paying  the  Banco  de  España’s  profits  to  the 
Treasury  on  three  previous  occasions3.  The  technical  modifications  proposed  in the  draft  decree  do  not 

affect  the  substance  of  the  current  scheme.  The  payment  schedule  for  profits  accrued  to  the  Banco  de 

España, recorded in its accounts and paid to the Treasury is proposed as follows: 

1  
2  

3  

OJ L 189, 3.7.1998, p. 42.  
Decision  ECB/2001/16  of  6  December  2001  on  the  allocation  of  monetary  income  of  the  national  central  banks  of 
participating Member Status from the financial year 2002 (OJ L 337, 20.12.2001, p. 55). 
ECB Opinions CON/2005/30 of 11 August 2005, CON/2002/14 of 25 April 2002 and CON/99/16 of 28 October 1999. 
Available on the ECB’s website at www.ecb.europa.eu.  

 
 
 
 
 
                                                 
– 

on the first working day of December of each year, 70% of the profits accrued and recorded until 

30 September of the same financial year, while the foreseen development of the results until year-

end is also taken into consideration; 

– 

– 

on the first working day in March in the next year, 90% of the profits accrued and recorded until 

31 December of the preceding financial year, less the instalment paid in December; 

the  remaining  profits  following  approval  by  the  Council  of  Ministers  of  the  Banco  de  España’s 

annual accounts for the financial year. The Council of Ministers, on a proposal from the Banco de 

España, may also authorise the exclusion of certain profits from the interim distribution rules.  

3. 

Specific observations 

3.1  Deferral to December of the first payment of profits to the Treasury 

The  ECB  welcomes  the  proposed  deferral,  from  November  to  December,  of  the  first  payment  of 

the Banco de España’s profits to the Treasury. It will bring the estimation of year-end results closer 

to the end of the year. 

3.2  Financial independence 

The  distribution  of  provisional  profits  before  the  end  of  the  year  entails  the  need  to  carefully 

consider  the  Banco  de  España’s  role  in  the  decision-making  process  for  profit  distribution.  The 

concept  of  financial  independence  should  be  assessed  from  the  perspective  of  whether  any  third 

party  is  able  to  exercise  either  direct  or  indirect  influence  not  only  over  the  tasks  of  a  national 
central bank (NCB) but also over its ability, understood both operationally in terms of manpower4, 

and  financially  in  terms  of  appropriate  financial  resources,  to  fulfil  its  mandate.  The  NCBs  must 

also, at all times, have sufficient financial means to carry out their other functions, i.e. to perform 

their national tasks, to meet their international obligations and properly cover their administrative 

and  operational  expenses.  It  should  be  noted  that  Articles  28.1  and  30.4  of  the  Statute  of  the 

European  System  of  Central  Banks  and  of  the  European  Central  Bank  (hereinafter  the  ‘ESCB 

Statute)  provide  for  further  calls  on  the  NCBs  to  make  further  contributions  to  the  capital  of  the 

ECB  and  to  make  further  transfers  of  foreign  reserves.  The  principle  of  financial  independence 

requires  that  compliance  with  these  provisions  leaves  an  NCB’s  ability  to  perform  its  functions 

unimpaired. With regard to profit allocation, an NCB’s statutes may prescribe how profits are to be 

allocated. In the absence of such provisions, the decision on allocation of profits should be taken by 

the  NCB’s  decision-making  bodies  on  professional  grounds,  and  should  not  be  subject  to  the 

discretion  of  third  parties  unless  there  is  an  express  safeguard  clause  stating  that  this  is  without 

prejudice to the financial means necessary for carrying out the NCB’s tasks related to the European 

System of Central Banks  (ESCB). In this regard, the ECB notes  that under Article 1 of the draft 

decree,  and  also  under  Royal  Decree  1198/2005,  the  Banco  de  España  adopts  the  prepayment 

4  

See  ECB  Opinion  CON/2008/9  of  21  February  2008  at  the  request  of  the  German  Ministry  of  Finance  on  a  draft  law 
amending the Law on the Deutsche Bundesbank; also ECB Opinion CON/2008/10 of 21 February 2008 at the request of 
the Italian Ministry of Economic Affairs and Finance on some provisions of the Law on the State annual and pluriannual 
budget (2008 Budget law).  

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agreement and the estimation of year-end results and proposes which part of its profits should be 

excluded from payment to the Treasury. The ECB understands that these rules grant the Banco de 

España the right to create provisions, thereby enabling it to build up financial reserves that should 

help  to  guarantee  the  availability  of  appropriate  independent  financial  means  to  meet  its 

obligations. Moreover, the ECB understands that the application of such rules, and the level of the 

provision, has ensured such availability of independent financial means, and the ECB considers it 

important that it continues to do so. Furthermore, regarding Article 1(2) of the draft decree and the 

Banco de España’s proposal to exclude some profits from provisional payment, the ECB considers 

that the authorisation of such exclusion by the Council of Ministers should be limited and should 

avoid any exercise of discretion in this context.  

3.3  Monetary financing 

Given  the  primacy  of  Community  law,  it  is  important  to  note  that  the  application  of  the  ESCB 

Statute may not be conditional on the provisions of national law. In particular, the draft decree must 

comply  with  the  monetary  financing  prohibition  laid  down  in  Article  101(1)  of  the  Treaty  and 

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  Treaty5.  This 

Regulation  prohibits  overdraft  facilities  or  any  other  type  of  credit  facility  with  the  ECB  or  the 

NCBs  of  Member  States  in  favour  of  Community  institutions  or  bodies,  central  governments, 

regional,  local  or  other  public  authorities,  other  bodies  governed  by  public  law,  or  public 

undertakings of Member States, and the purchase directly from these public sector entities by the 

ECB or NCBs of debt instruments.  

In  order  to  comply  with  the  monetary  financing  prohibition,  it  is  of  crucial  importance  that  the 

distribution of profits by instalments does not imply advances on future or provisional profits but is 

rather  the  result  only  of  profits  that  are  fully  realised,  accounted  for  and  audited,  which  in  turn 

requires due calculation of profits and losses. In this context, it appears necessary to have formal 

approval of the profit and loss account for the considered period before the distribution of profits. 

Although  a  ceiling  of  70  %  of  profits  for  the  first  payment  provides  some  safeguard,  it  could 

theoretically not be sufficient if, for instance, heavy losses at year-end exceeded 30 % of the profits 
realised  in  the  first  nine  months  of  the  financial  year6.  In  this  regard,  the  risk  of  insufficient 

coverage  of  losses  at  year-end  is  reduced  by  deferring  the  first  payment  from  November  to 

December.  In  this  context,  the  ECB  understands  that  the  Governing  Council  of  the  Banco  de 

España will assess the amount to be deducted from the first payment on the basis of information 

known in December related to the profits for the greater part of the year (11 months out of 12). The 

Governing Council of the Banco de España should apply this arrangement prudently to ensure that 

5  
6   

OJ L 332, 31.12.1998, p. 1. 
In paragraph 6(ii) of CON/99/16 the ECB stated that the draft ‘would better satisfy this concern by providing for a formal 
approval by the Governing Council of Banco de España of the profits and loss account which serves as a basis for the 
calculation of the advance pay outs, and the pay out be conditioned to an assessment by that body that expected economic 
developments for the final quarter of the year would not give rise to such a risk.’  

3 

                                                 
it  does  not  result  in  any  advance  profit  distribution  to  the  Treasury,  since  that  would  constitute 

credit to the public sector, and thus be contrary to the monetary financing prohibition. 

This opinion will be published on the ECB’s website. 

Done at Frankfurt am Main, 2 December 2008. 

[signed] 

The President of the ECB 

Jean-Claude TRICHET 

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