Opinion of the European Central Bank of 15 February 2012 on the reorganisation of the Spanish financial sector (CON/2012/11)
Date: 2012-02-15
Institutions: European Central Bank
Subjects: Eurosystem, Spain, claim, credit institution, financial stability, national law, property market, real estate credit

EN 

ECB-PUBLIC 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 15 February 2012 

on the reorganisation of the Spanish financial sector 

(CON/2012/11) 

Introduction and legal basis 

On 2 February 2012, the European Central Bank (ECB) received a request from the Deputy Minister for 

Economic  Affairs  and  Competitiveness  for  an  opinion  on  Royal  Decree-Law  2/2012  on  the 

Reorganisation of the financial sector (hereinafter the ‘Royal Decree-Law’). 

The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the 

Functioning  of  the  European  Union  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  provisions1,  as  the  Royal  Decree-Law  relates  to  the  Banco  de 

España and to 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-Law 

The Royal Decree-Law is primarily aimed at addressing market concerns over the valuation of real estate 

assets  to  which  credit  institutions  and  consolidated  groups  of  credit  institutions  have  large  exposures 

through loans to real estate developers and repossessed assets. It provides for the ‘cleaning-up’ of bank 

balance  sheets  by  increased  (generic  and  specific)  provisioning  combined  with  a  requirement  for  an 

additional  capital  buffer  on  impaired  assets.  The  total  amount  to  be  provisioned  is  estimated  at 

EUR 50 billion. 

The Royal Decree-Law is also aimed at promoting consolidation of the sector to strengthen profitability 

and  to  eliminate  overcapacity,  encouraging  as  much  as  possible  private  solutions  in  the  consolidation 

process. In this context, entities involved in a merger will have to present a viability plan and corporate 

governance  measures  that  allow  for  quick  and  efficient  integration;  additionally,  they  must  commit  to 

increasing  the  number  of  loans  granted  to  the  private  sector.  In  this  regard,  the  Royal  Decree-Law 

introduces  operational  changes  to  the  Fund  for  Orderly  Bank  Restructuring  (FROB)  by  enabling  it  to 

provide  financing  through  convertible  bonds  in  the  merger  process.  The  FROB’s  own  resources  are 

increased from EUR 9 billion to 15 billion. 

1  

OJ L 189, 3.7.1998, p. 42.  

 
 
 
 
                                                 
ECB-PUBLIC 

The Royal Decree-Law strengthens corporate governance of savings banks that indirectly exercise their 

financial  activity  by  simplifying  their  legal  framework,  with  management  remuneration  limits  for  the 

institutions assisted by public funds.  

Finally,  the  Royal  Decree-Law  streamlines  the  procedures  for  mobilising  collateral  in  favour  of  the 

Eurosystem.  Following  the  Royal-Decree  Law,  two  significant  changes  can  be  introduced  in  the 

Eurosystem  collateral  management  procedures.  As  regards  marketable  securities,  besides  the  current 

method  of  earmarking,  counterparties  could  create  pledges  by  transferring  the  relevant  securities  to  a 

dedicated  securities  account  of  the  beneficiary,  in  line  with  the  collateral  management  procedures 

currently used within the Eurosystem. As regards credit claims, the Royal Decree-Law sets the basis for 

counterparties to create valid security interest s over credit between the parties by merely including the 

relevant credit claims in a list submitted to the collateral taker. The Royal Decree-Law expressly clarifies 

that  the  express  consent  of  the  guarantor  or  the  debtor  of  the  credit  claims  granted  as  collateral  is  not 

required for the valid creation of the security.  

2. 

General observations  

The ECB only received the consultation request on 2 February 2012, although the Royal Decree-Law was 

approved by the Spanish Government on 3 February. The consultation request did not state the dates of 

approval by the Government or validation by the Parliament, nor did it establish a specific time limit. As 

underlined  in  several  ECB  opinions,  Article  3  of  Decision  98/415/EC  provides  that  the  consulting 

authorities  may set a time limit for the submission of an ECB opinion, but it  may not be less than one 

month, unless a shorter time limit is justified with reasons for the extreme urgency. The ECB reminds the 

consulting authority of the importance of consulting the ECB at an appropriate point in time ‘enabling the 

authority  initiating  the  draft  legislative  provision  to  take  into  consideration  the  ECB’s  opinion  before 
taking its decision on the substance’2. 

3. 

Specific comments 

3.1  Rules regarding the one-off increase in provisioning and capital buffers 

Title  I  of  the  Royal  Decree-Law  aims  at  addressing  banks’  impaired  exposures  to  land  and  real  estate 

under  development  in  Spain  through  increased  provisions  and  additional  capital  buffers  for  those 

exposures.  The  assets  concerned  are  those  classified  as  doubtful,  substandard  or  foreclosed.  It  also 

requires  banks  to  provision  against  the  performing  (normal)  exposures  to  the  abovementioned  assets. 

These measures are broadly welcomed by the ECB as strengthening the resilience of the Spanish banking 

sector at the current juncture while limiting the scope for public intervention. In this context, the ECB has 

two observations. First, in the current situation in the Spanish real estate market, where market activity is 

very  low  or  even  non-existent  in  some  segments,  it  is  appropriate  to  apply  the  same  treatment  of  the 

valuation of real estate properties across the market to ensure simplicity and transparency of valuations; 

2  

See Article 4 of Decision 98/415/EC. 

2 

 
 
                                                 
ECB-PUBLIC 

however, once market activity recovers, market values should be applied for valuing real estate assets and 

collateral.  

Second, the new measures apply to the classified assets as of end-December 2011 and need to be fulfilled 

by banks by end-2012, and, for some credit institutions involved in merger processes, by 2013. The ECB 

recommends  providing additional guidance in order to avoid ambiguity as to how the provisioning and 

capital buffers should be made for those classified assets that may be recovered or disposed in 2012 or in 

the following period, if the measures are extended.  

3.2 

Integration process and corporate governance of savings banks 

The  ECB  welcomes  the  implicit  incentives  provided  by  the  Royal  Decree-Law  for  banks  to  engage  in 

further integration activity through: (a) an extension of the deadline to comply with the new provisioning 

requirements; and (b) a possibility to obtain financing from the FROB to facilitate the integration process. 

The  Royal  Decree-Law  also  contains  a  requirement  for  those  banks  that  opt  for  public  support  via  the 

FROB  to  further  improve  their  corporate  governance,  which  is  aimed  at  improving  the  professionalism 

and  dedication  of  the  members  of  their  decision-making  bodies.  The  ECB  generally  supports  the 

measures  while  highlighting  that  mergers  only  among  the  weaker  institutions  might  limit  the  overall 

benefits of the reform. 

3.3  Rules regarding the posting of collateral in favour of the Eurosystem 

The  Royal  Decree-Law  updates  the  wording  of  the  sixth  additional  provision  of  Law  13/1994  of 

1 June 1994  on  the  Banco  de  España’s  autonomy,  which  contains  the  rules  on  creating  and  enforcing 

security interests granted in favour of the Banco de España, the ECB and Union central banks in general. 

The  ECB  welcomes  this  initiative,  as  it  will  enhance  legal  certainty  and  will  increase  operational 

efficiency,  streamlining  the  procedures  for  the  posting  of  collateral  in  favour  of  the  Eurosystem.  These 

streamlined procedures for mobilising collateral in a more timely and efficient manner will amplify the 

operational capacity of the Spanish counterparties while, at the same time, preserving the protection of the 

Banco de España and, more generally, of the Eurosystem from incurring losses when conducting credit 

operations with them. Moreover, the alignment of the procedures for the mobilisation of collateral with 

those applied in other Member States is regarded as a step forward in ensuring an equal level playing field 

for counterparties across the euro area.  

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

Done at Frankfurt am Main, 15 February 2012. 

[signed] 

The Vice-President of the ECB 

Vítor CONSTÂNCIO 

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