Opinion of the European Central Bank of 9 January 2013 on early intervention, restructuring and resolution of credit institutions (CON/2013/3)
Date: 2013-01-09
Institutions: European Central Bank
Subjects: Spain, State aid, banking supervision, company in difficulties, credit institution, financial intervention, financial stability, national law

EN 

ECB-PUBLIC 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 9 January 2013 

on early intervention, restructuring and resolution of credit institutions 

(CON/2013/3) 

Introduction and legal basis 

On 21 August 2012, the European Central Bank (ECB) received a request from the Under-Secretary of 

the Spanish Ministry of Economic Affairs and Competitiveness for an opinion on a draft Royal decree-

law (hereinafter the  ‘Royal  Decree-Law’)  that  establishes  a comprehensive  regime  for the  restructuring 

and resolution of credit institutions (hereinafter ‘CIs’). 

The  Royal  Decree-Law  was  approved  on  31  August  2012  by  the  Council  of  Ministers  and  was  then 

submitted  to  the  Parliament  to  be  processed  as  an  ordinary  law,  allowing  amendment  prior  to  its  final 

approval by the Parliament. 

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 and contents of the Royal Decree-Law  

The  Royal  Decree-Law  establishes  an  innovative  and  comprehensive  framework  for  early  intervention, 

restructuring and resolution processes for CIs. It also modifies the legal regime for the Fund for Orderly 

Bank Restructuring (FROB) and the conduct of management activities of hybrid capital instruments and 

subordinated debt. 

The main objectives of the Royal Decree-Law are: (a) to ensure the continuity of systematically important 

activities of CIs, as well as systems for payment, set-off and liquidation; (b) to avoid harm to the stability 

of  the  financial  system,  preventing  contagion  to  the  financial  system  as  a  whole;  and  (c)  to  minimise 

public financial support. 

1  

OJ L 189, 3.7.1998, p. 42.  

 
 
 
 
                                                 
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Intervention is based, inter alia, on the following principles: 

(a)  

shareholders, stakeholders or partners will first bear losses; 

(b)  

subordinated  creditors  will  absorb  losses  after  shareholders,  in  accordance  with  the  hierarchy  of 
creditors established under Law 22/2003 of 9 July on insolvency (hereinafter ‘Law 22/2003’)2;  

(c)  

creditors of the same rank will be treated equally; 

(d)   no creditor will bear losses greater than those it would have borne if the entity had been liquidated 

as  part  of  an  insolvency  procedure.  For  the  purposes  of  ensuring  an  adequate  distribution  of  the 

restructuring or resolution costs, the FROB is not included as a shareholder, stakeholder, partner or 

creditor. 

All  interventions  will  be  based  on  a  valuation  of  the  CI  or  of  its  assets  and  liabilities  by  independent 

experts. In the valuation process, the actual or potential financial support received or to be received by the 

CI will be disregarded. 

1.1  Early intervention measures 

Early  intervention  measures  apply  where  a  CI  cannot  meet  requirements  on  solvency,  liquidity, 

organisational  structure  or  internal  control,  but  is  in  a  position  to  be  able  to  comply  again  with 

requirements  without  support.  Early  intervention  measures  are  considered  to  be  supervisory  measures, 

and  therefore  fall  under  the  responsibility  of  the  Banco  de  España.  Where  a  CI  cannot  meet  the  above 

requirements, it must present to the Banco de España, or the Banco de España may request, an action plan 

describing the measures that it intends to adopt to guarantee its long-term viability without public support. 

The Banco de España must then approve the action plan and may require amendments. Among the early 

intervention  measures that  the  Banco  de  España  may  adopt,  such  as  calling  a  shareholders  meeting,  or 

requiring the renegotiation of debts, are recapitalisation measures that must be approved by the FROB. 

These measures relate to shares or convertible securities repayable or convertible within two years. If the 

measures are not sufficient, the Banco de España may order the replacement of the Board of Directors of 

the CI. 

The CI must report to the Banco de España every three months on measures taken under the action plan. 

If  the  CI  recovers  from  its  ‘deterioration’  situation,  the  Banco  de  España  will  conclude  the  process  of 

early  intervention.  However,  the  Banco  de  España  will  move  to  open  a  restructuring  or  resolution 

proceeding  in  the  following  situations:  (a)  where  a  CI  is  unable  to  recover  from  its  ‘deterioration’ 

situation; (b) where no action plan is presented; (c) where the CI is not viable or does not comply with the 

early intervention measures. 

1.2  Restructuring of a CI 

A CI will be restructured in the following situations: (a) where it requires public funds to guarantee its 

viability;  (b)  where  objective  criteria  indicate  that  such  support  from  public  funds  will  be  repaid  or 

recovered within a fixed period; (c) in the absence of such objective criteria, where the orderly resolution 

2  

Ley Concursal, BOE 164, 10.7.2003. 

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of  the  institution  would  have  seriously  damaging  effects  on  the  stability  of  the  financial  system  as  a 

whole, as determined by the Banco de España (i.e. where the CI is systemic in nature). 

The CI must present a restructuring plan to ensure its long-term viability and this plan must be approved 

by  the  FROB  and  ultimately  by  the  Banco  de  España.  The  plan  must  contain  management  actions  for 

hybrid  capital  instruments  and  subordinated  debt,  as  well  as  the  instruments  for  restructuring.  The  CIs 

may use financial support measures and may transfer assets to an asset management company (AMC).  

Provided that the conditions for resolution are met, the Banco de España may commence resolution in the 

following  situations:  (a)  where  the  CI  is  unable  to  recover  from  its  ‘deterioration’  situation;  (b)  where 

financial  support  has  not  been  repaid  within  the  deadline;  or  (c)  where  there  are  implications  for  the 

stability of the system. 

1.3  Orderly resolution 

Orderly resolution will be implemented where: (a) a bank is non-viable or is expected to become so in the 

future;  and  (b)  for  reasons  of  public  interest,  it  is  necessary  or  advisable  to  proceed  to  its  orderly 

resolution. 

A resolution will also be applied in the following circumstances: (a) where a CI subject to a restructuring 

process has not presented a restructuring plan; (b) where a plan which has been presented is inadequate; 

or (c) where a CI fails to apply the restructuring measures. 

For  the  purposes  of  resolution,  a  CI  will  be  considered  non-viable  if:  (a)  it  significantly  fails  to  meet 

solvency requirements; (b) its liabilities exceed its assets or it is reasonably foreseeable that they will do 

so in the near future; (c) it cannot meet its obligations promptly or it is foreseeable that it will not be able 

to do so in the near future; and (d) it is not reasonably foreseeable that the CI in question will be able to 

alter its situation within a reasonable period whether by its own funds, by going to the markets or by a 

restructuring. 

The Banco de España will inform the Ministry of Economic Affairs and the FROB about any resolution 

process it launches, and will replace the Board of Directors of the relevant CI with persons appointed by 

the FROB. Within two months the FROB  must present a resolution plan setting out: (a) the conditions 

justifying  the  resolution  process;  (b)  the  resolution  tools  to  be  used;  (c)  the  financial  support  measures 

provided by the Deposit Guarantee Fund (DGF); (d) an economic assessment of the relevant CI; (e) any 

actions  for  the  management  of  hybrid  capital  instruments  and  subordinated  debt  to  be  performed;  and 

(f) the time frame for the execution of the plan. The plan must be approved by the Banco de España. 

1.4   Resolution tools 

(a) 

Sale of business of the CI: this tool allows the FROB to sell shares, assets or liabilities of the CI 

without  the  shareholders’  consent.  The  sale  will  take  place  under  market  conditions,  in  a 

competitive process and will exclude costs incurred by the FROB. 

(b)  Bridge bank: the FROB may transfer all or part of the assets and liabilities of a CI to a bridge bank 

participated in by the FROB. The bridge bank will be subject to supervisory rules, and will exist for 

a  maximum  duration  of  five  years.  When  all  assets  and  liabilities  of  the  bridge  bank  have  been 

transferred to another institution, or if the FROB no longer participates, the bridge bank will lose its 

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banking licence and will be liquidated through an insolvency procedure within one year from the 

FROB’s divestment. 

(c) 

Financial  support  measures:  the  measures  described  under  1.5  below  shall  be  granted,  where 

necessary, in order to facilitate the implementation of any of the other resolution tools. 

(d)  AMC: this resolution tool is described under paragraph 5 below. 

The tools under (a) to (c) above can be accelerated in urgent cases, with the prior approval of the Banco 

de España. To this end, the FROB can use an urgent valuation system, which dispenses with independent 

expert reports. 

1.5  Financial support measures 

The following financial support measures may be provided by the FROB: (a) the issuing of guarantees; 

(b) the granting loans or lines of credit; (c) the acquisition of assets or liabilities; or (d) recapitalisation 

using either (i) ordinary shares or share capital contributions; or (ii) instruments convertible into ordinary 

shares or share capital contributions (CoCos), which will be repaid under market conditions, or converted 

within five years or earlier, if the FROB considers repurchase within the specified period improbable.  

The  shares  or  CoCos  provided  by  the  FROB  will  be  treated  as  basic  equity  and  principal  capital.  The 

subscription or acquisition price of those shares or CoCos may be paid in cash or through the transfer of 

securities  representing  public  debt, issued  by  the  European  Financial  Stability  Facility  or  the  European 

Stability Mechanism, or issued by the FROB itself. 

1.6  AMCs 

The FROB  may oblige a CI to transfer to an AMC particular categories of toxic or potentially harmful 

assets, so that such assets can be excluded from the institution’s balance sheet and can be independently 

disposed of. The AMC will be a limited liability company and may issue bonds and debt securities. The 

transfer  of  assets  to  the  AMC  will  not  require  third  party  consent,  and  will  be  based  on  a  valuation 

pursuant to criteria to be established by a regulation. 

1.7  Management of hybrid capital instruments and subordinated debt 

The  Royal  Decree-Law  allows  liability  management  in  the  context  of  restructuring  and  resolution  of 

hybrid  capital  instruments  and  subordinated  debt  to  ensure  a  proper  distribution  of  the  costs  for  the 

restructuring or resolution of the institution. The Royal Decree-Law establishes a two step process. 

Step one represents a voluntary offer conducted with the holders of hybrid instruments and subordinated 

debt.  This  voluntary  offer  can  be  made  by  way  of:  (a)  exchange  offers  for  other  capital  instruments; 

(b) repurchase offers; (c) reduction of nominal value; or (d) advance amortisation at a different value.  

Step two represents a coercive regime under which the FROB will be authorised to enforce mandatory 

burden sharing. The coercive regime can be conducted by way of: (a) deferment, suspension, elimination 

or modification of certain rights, obligations, terms and conditions of the issues; or (b) repurchase of the 

securities at a price determined by the FROB. The Royal Decree-Law contains appropriate safeguards, a 

no worse-off principle and allows for the ex-post judicial review of the liability management exercise. To 

evaluate  the  management  activity,  the  FROB  must  take  into  account  criteria  such  as,  inter  alia,  the 

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proportion  represented  by  the  hybrid  capital  and  subordinated  debt  with  respect  to the  CI’s  total  assets 

received, the amount of public aid received by the CI, the market value of subordinated instruments or the 

capacity of the CI to attract market resources.  

The  subordinated  debt  and  hybrid  capital  subscribed  by  the  FROB  will  be  exempted  from  the 

management activities. 

1.8  FROB 

1.8.1  The  FROB  will  implement  the  restructuring  and  orderly  resolution  processes.  Under  the  Royal 

Decree-Law its powers are enhanced and its legal structure is modified. It will be financed by the 

State general budget, although the Royal Decree-Law does not provide for a specific amount. 

The FROB’s Board will be composed of nine members, four of which are appointed by the Banco 

de  España.  The  remaining  five  will  be  high-ranking  officials  from  the  Ministry  of  Economic 

Affairs and the Ministry of Finance. In the absence of a conflict of interest, observers may attend 

board meetings. 

The  FROB  is  subject  to  parliamentary  oversight  on  a  quarterly  basis,  and  must  inform  the 

Parliament whenever it implements a restructuring or resolution plan. The FROB is also subject to 

secrecy obligations, but must cooperate with other national and international authorities involved in 

the supervision, restructuring or resolution of CIs. 

1.8.2  The  FROB  will  enjoy  commercial  and  administrative  powers.  The  FROB’s  use  of  resolution 

powers  will  not  be  subject  to  any  further  authorisation,  and  its  decisions  will  enter  into  force 

immediately.  The  FROB  will  make  public  the  implementation  of  resolution  and  restructuring 

measures. It may also suspend certain payment obligations or guarantees derived from contracts. 

The  FROB’s  decisions  may  be  challenged  before  the  commercial  courts  or  the  Administrative 

Branch  of  the  National  Audience,  depending  on  their  nature.  The  Banco  de  España’s  decisions 

confirming  the  restructuring  or  resolution  plans  proposed  by  the  FROB  may  also  be  challenged 

before the Administrative Branch of the National Audience. 

1.9  Other measures  

The Royal Decree-Law contains other miscellaneous provisions, including on: 

the legal structure for the AMC, with the details to be established by a regulation; 

the trading of preferred shares, convertible debt securities and subordinated financing, whereby at least 

one  half  of  these  securities  must  be  addressed  to  professional  investors  and  a  minimum  investment  of 

EUR 100 000 will be required; and 

the requirements of core capital for CIs are amended to a general requirement of 9% from January 2013. 

The definition of core capital is amended and harmonised with the definition provided by the European 

Banking Authority. 

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2. 

General observations 

2.1  The Royal Decree-Law is a complex and innovative piece of legislation adopted in the context of 
the  Memorandum  of  Understanding  on  Financial  Sector  Policy  Conditionality  for  Spain3 

(hereinafter the ‘MoU’), and in the context of the on-going restructuring and recapitalisation of the 

Spanish  banking  sector.  The  Royal  Decree-Law  will  strengthen  the  framework  for  early 

intervention, restructuring and resolution measures, as well as the Subordinated Liability Exercises 
(SLEs) over holders of hybrid capital instruments and subordinated debt4. 

2.2  The ECB welcomes the introduction of a comprehensive bank resolution framework which aims at 

safeguarding the financial soundness of CIs, the interests of guaranteed depositors and the stability 

of  the  financial  system.  This  opinion  suggests  some  technical  improvements  to  the  overall  good 

quality of the Royal Decree-Law. 

2.3  The ECB understands that the enactment of a legal framework on bank recovery and resolution is 

somewhat  complicated  due  to  the  absence  of  a  stable  legislative  proposal  at  Union  level,  and 

invites  the  consulting  authority  to  review  the  content  of  the  law  in  the  light  of  the  future  Union 

regulatory framework on bank recovery and resolution, in particular with regard to resolution tools 

and the powers of resolution authorities, and of the forthcoming recast of Directive 94/19/EC of the 
European Parliament and of the Council of 30 May 1994 on deposit-guarantee schemes5. The same 

applies with respect to the development of a single supervisory authority in the coming months. 

3. 

Role of the Banco de España 

The Banco de España plays an extensive role in intervention for CIs under the Royal Decree-Law. It will 

adopt and implement early interventions. It will also determine the systemic nature of a CI, thus allowing 

for its restructuring where there are financial stability implications. It may trigger the resolution process 

and  may  be  involved  in  the  use  of  some  resolution  tools,  such  as  the  AMC,  where  it  fixes  the  value 

attributed to the assets for transfer purposes in accordance with the expert valuation report. 

The ECB understands that the tasks allocated to the Banco de España under the Royal Decree-Law do not 

interfere  with  the  performance  of  its  Eurosystem-related  tasks  provided  for  by  the  Treaty  and  do  not 

prejudice  the  financial  means  necessary  for  carrying  out  the  Banco  de  España’s  Eurosystem-related 
tasks6.  Any  involvement  of  the  Banco  de  España  and  of  the  members  of  its  decision-making  bodies in 

measures to strengthen financial stability must be compatible with the Treaty and, consequently, with the 

Banco de España’s institutional and financial independence, as well as with the personal independence of 

the members of its decision-making bodies safeguarding the proper performance of their tasks under the 
Treaty and the Statute of the European System of Central Banks and of the European Central Bank7. 

3  
4  
5  
6  
7  

Available on the European Commission’s website at http://ec.europa.eu. 
See the Spanish Memorandum of Understanding on Financial-Sector Policy Conditionality of 20 July 2012.  
OJ L 135, 31.5.1994, p. 5. 
The ECB’s Convergence Report May 2010, p. 22. 
See paragraph 3.1.4 of Opinion CON/2009/93. 

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The ECB welcomes the tasks allocated to the Banco de España under the Royal Decree-Law which are 

broadly consistent with its financial stability role. 

Pursuant  to  Article  51(3) of  the  Royal  Decree-Law,  the  FROB’s  cash  services  will  be  provided  by  the 

Banco de España, with whom it will enter into a necessary agreement to this effect. The ECB understands 

that  the  Banco  de  España  will  hold  FROB  deposits.  Such  provisions  do  not  raise  concerns  about 

compliance  with  the  monetary  financing  prohibition  as  long  as  the  services  provided  by  the  Banco  de 

España do not entail the extension of credit, including overnight overdrafts. In particular, it is essential 

that  the  remuneration  of  such  deposits  reflects  market  parameters  and  it  is  also  important  to  link  the 
remuneration rate of the deposits to their maturity8. 

4. 

Priority claim in respect of covered deposits 

With respect to the principles of restructuring and orderly resolution of CIs under Article 4 of the Royal 

Decree-Law, the Spanish authorities should consider including a preference rule for guaranteed deposits. 
Currently,  six  Member  States  -  including  Bulgaria9,  Greece10,  Latvia11,  Hungary12,  Portugal13  and 
Romania14  -  have  granted  priority  ranking  to  claims  that  the  Deposit  Guarantee  Scheme  (DGS)  has 

acquired by subrogation after having paid out the amounts corresponding to covered deposits, thus further 

contributing to ensuring that sufficient funding is always available to the DGS. 

Views on the impact of granting preferential ranking to depositors are highly divergent, as it is believed 

that such preferential ranking may have an impact on the funding costs available to banks and that greater 

efforts will be made by other creditors to secure their claims. On the other hand, this impact would be 

somewhat mitigated to the extent that priority claims extend to guaranteed deposits only. Furthermore, a 

legal  regime  that  establishes  priority  ranking  of  guaranteed  depositors  should  facilitate  the  use  of 

resolution measures provided for in the proposed directive (e.g., sale of business tool, bridge institution 

tool). From a financial stability perspective, the priority claim in respect of the covered deposits is also 

8  
9 

10 

11  

12 

13 

14 

See the ECB’s Convergence Report May 2012, pp. 30-31. 
Preferred creditor status is established for DGS by Article 94(1) of the Law on bank insolvency (Darjaven vestnik No 92, 
27.9.2002). 
Depositor preferred creditor status is established by Article 4(16) of Law 3746/2009 transposing Directive 2005/14/EC 
on insurance against civil liability in respect of the use of motor vehicles and Directive 2005/68/EC on reinsurance and 
other provisions (FEK A 27, 16.2.2009). Article 13a(4) establishes the DGS’ status.  
Law of 5 October 1995 on credit institutions (LV 163(446), 24.10.1995). Article 192(1) introduced preferential ranking 
for guaranteed depositors on 21 May 1998. 
Law CXII of 1996 on credit institutions and financial undertakings (Magyar Közlöny 1996/109, 12.12.1996), and more 
specifically Chapter XV of the Law on the details of the deposit guarantee scheme . The preferential status of all, and not 
only guaranteed, deposit claims is established by Article 183(1) of the Law. 
See Article 166-A of consolidated version of Decree-Law No 298/92 of 31 December on the legal framework of credit 
institutions and financial undertakings (D.R. No 30, I, 10.2.2012). 
Government Ordinance No 10/2004 on the proceedings for judicial reorganisation and bankruptcy of credit institutions, 
as further amended and supplemented, in particular by Article 38, gives a preferential right, after expenses related to the 
bankruptcy proceedings have been settled to claims arising from guaranteed deposits, including the claims of the DGS 
arising from repayments to the guaranteed depositors (Monitorul Oficial al României, Part One, No 84, 30.1.2004). 

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supported as it reduces the risks of bank runs, potential losses of the insured depositors in a liquidation 
phase, as well as the excessive depletion of the DGS15. 

5. 

AMC 

The  principles,  structure,  governance  and  other  fundamental  aspects  of  the  AMC  will  be  further 

developed in Spanish legislation over the coming months. The ECB reminds the Spanish authorities that 

the obligation to consult the ECB concerns any provisions ‘which, once they become legally binding and 

of  general  applicability  in  the  territory  of  a  Member  State,  lay  down  rules  for  an  indefinite  number  of 

cases  and  are  addressed  to  an  indefinite  number  of  natural  or  legal  persons’,  and  includes  secondary 

legislation, such as regulations. The ECB expects to be consulted on the further legislation concerning the 

regulation of the AMC at an appropriate stage in the legislative process. This implies that the consultation 

should  take  place  at  a  point  in  the  process  which  affords  the  ECB  sufficient  time  to  examine  the  draft 

legislative  provisions,  and  which  also  enables  the  national  authorities  to  take  the  ECB’s  opinion  into 

consideration before the provisions are adopted. 

6. 

Restructuring of systemic institutions 

Article 13 of the Royal Decree-Law allows the restructuring of a CI, using public financial support, where 

objective  elements  do  not  exist  allowing  a  reasonable  prediction  that  this  support  will  be  repaid  or 

recovered.  Under  Article  13,  such  a  restructuring  is  only  permissible  where  the  CI’s  resolution  would 

have seriously damaging effects on the stability of the financial system as a whole, in order to minimise 

the use of public funds. 

The  ECB  is  of  the  view  that  the  restructuring  of  a  non-viable  entity  as  a  going  concern  (‘open  bank 

scenario’) instead of resolving it as a  gone concern (‘closed bank scenario’) should only be considered 

under  exceptional  circumstances,  where  the  orderly  resolution  of  a  CI  would  have  seriously  damaging 
effects on the stability of the financial system, with heightened risk of contagion across borders16.  

It  is  important  to  note  that  the  proposal  for  an  EU  directive  on  bank  recovery  and  resolution17  only 
provides  for  the  recapitalisation  of  a  non-viable  entity  via  ‘going-concern  bail-in’  within  resolution18. 

This  means  that  the  restructuring  of  the  entity  is  embedded  in  the  resolution  regime,  allowing  other 

resolution tools to also be used and the application of resolution safeguards. 

In  line  with  the  proposed  directive,  the  Royal  Decree-Law  should  make  clear  that  prior  to  any  use  of 

public funds for restructuring a non-viable entity, (a) existing shares/equity instruments are cancelled on a 

15  
16  
17  

18  

ECB Opinion CON/2012/99, paragraph 8.2. 
ECB Opinion CON/2012/99, paragraphs 1 and 6.2.  
Commission  proposal  for  a  directive  of  the  European  Parliament  and  of  the  Council  establishing  a  framework  for  the 
recovery  and  resolution  of  credit  institutions  and  investment  firms  and  amending  Council  Directives  77/91/EEC  and 
82/891/EC,  Directives  2001/24/EC,  2002/47/EC,  2004/25/EC,  2005/56/EC,  2007/36/EC  and  2011/35/EC  and 
Regulation (EU) No 1093/2010, COM(2012) 280 final. 
Article 37(2)(a).  

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mandatory basis, (b) all available means of creditor participation under the Spanish resolution framework 

are exhausted, and (c) appropriate measures are taken to address moral hazard, such as the replacement of 

an entity’s management. 

7.  Mandatory recapitalisation 

The ECB welcomes the fact that the Royal Decree-Law entrusts the FROB with administrative capacities 

which allow for an effective intervention in a CI with the aim of preserving financial stability. However, 

as  far  as  concerns  mandatory  recapitalisation  under  Article  62(d)  of  the  Royal  Decree-Law,  any 

overriding  of  shareholders’  rights  would  require  careful  consideration  in  light  of  shareholders’  rights 

under Union directives. In this respect, the ECB suggests limiting such powers to the resolution of CIs 

and restructuring of systemic institutions. 

Similar issues need to be considered with respect to the enforceability of close-out netting and financial 

collateral arrangements under Union directives. 

8.   Use of government bonds to recapitalise CIs 

Pursuant to Article 30(2), first sentence, of the Royal Decree-Law, the FROB may fund recapitalisation of 

CIs by cash or alternatively through the transfer of securities representing public debt or securities issued 
by  the  FROB.  As  stated  in  previous  ECB  opinions19,  where  a  recapitalisation  of  a  CI  to  restore  its 

solvency takes place by way of direct placement of State-issued debt instruments, the subsequent use of 

such bonds or financial instruments as collateral in central bank liquidity operations would raise monetary 

financing concerns in the absence of any alternative market-based funding sources for such State-issued 
debt  instruments. The same  concerns  would  arise if the  securities issued by  the  FROB20  are  used for  a 

bank recapitalisation. 

9.   Removal  of  licence  of  the  ‘rump’  entity  following  the  transfer  of  assets  and  liabilities  to  a 

bridge bank 

The Royal Decree-Law provides that the bridge bank will be subject to the regulations applicable to CIs, 

including supervisory and sanctioning regimes. It could specify that the bridge bank will be authorised as 

a CI, which is implied by the paragraph on the withdrawal of authorisation. The Royal Decree-Law does 

not  contain  any  provisions  on  the  treatment  of  the  banking  licence  of  a  CI  after  most  of  its  assets  and 

liabilities  are  transferred  to  a  bridge  bank.  It  could  specify  that,  when  a  bridge  bank  is  granted 

authorisation, the authorisation for the CI undergoing resolution will be withdrawn. 

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See, for example, Opinions CON/2012/64 and CON/2012/71. 
The FROB is a public law entity with legal personality and closely dependent on the State. 

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ECB-PUBLIC 

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

Done at Frankfurt am Main, 9 January 2013. 

[signed] 

The President of the ECB 

Mario DRAGHI 

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