Key Benefits:
III
Law 11/2015, of 18 June, on the recovery and resolution of credit institutions and investment firms, requires that this type of entity have a number of liabilities that can absorb losses in the event that a resolution process is initiated, which is known as the minimum requirement for own funds and eligible liabilities (MREL). In this way, the maximum protection of public resources is ensured in the event that the entities go through difficulties, as imposed by the rules of the European Union.
The relevance of this requirement is limited to that in such extreme scenarios as the resolution of a credit institution or investment firm, it has a number of liabilities that allow it to absorb losses. In this way, it is ensured that the resolution tools can be applied with maximum efficiency while increasing the maximum protection of public resources in case the entities reach this situation.
Law 11/2015 of 18 June 2015 on the recovery and resolution of credit institutions and investment firms transposed Directive 2014 /59/EU of the European Parliament and of the Council of 15 May 2014 on the establishes a framework for the restructuring and resolution of credit institutions and investment firms, which is currently in the process of being amended to meet the international standards set by the Council of Financial stability and applied by many countries. In accordance with these standards, in order to ensure that the taxable liabilities for the purpose of that minimum requirement do not give rise to any doubts to the resolution authority over its capacity to absorb losses, the liability in question must not be order of precedence equal to other liabilities in respect of which there are a priori doubts about its capacity to absorb losses.
To this end, the European Commission adopted on 23 November 2016 its proposal for a Directive of the European Parliament and of the Council amending Directive 2014 /59/EU of the European Parliament and of the Council on the order of priority of the unsecured debt instruments in the event of insolvency. It establishes a harmonised regime which will allow the calculation for the purposes of the minimum requirement of own funds and eligible liabilities of certain debt instruments that comply with certain properties, the most important being that it does not have a order of precedence equal to other liabilities far less capable of absorbing losses. The Commission's proposal therefore follows on from the need to incorporate into Union law the total loss absorption capacity (TLAC) rule published in the framework of the Financial Stability Board of 9 November 2016 and adopted a week later at the G20 Summit in Turkey.
In the modification of the additional provision in the 14th of Law 11/2015, of June 18, of recovery and resolution of credit institutions and investment services companies, all these initiatives have been taken into account. In this way, its content welcomes the international standard and incorporates it into the internal law, as the countries of our environment have already done in order to fulfill in the most effective way possible with the requirements that are established by the already in case of demanding resolution regulations.
Additionally, a new classification of ordinary credits is established in the cases of insolvency of credit institutions and investment firms affected by Law 11/2015, of June 18, of recovery and resolution of credit institutions and investment firms. Within the ordinary appropriations, the preferential and non-preferential ordinary claims shall be distinguished, with the non-preferential claims being less than the preferred rate. An ordinary credit may only be considered as non-preferential if it meets all the requirements laid down in this standard, which seek to ensure that the liability absorbs losses easily if the institution's resolution is agreed.
By this amendment of the resolution legislation, it is elevated to the ordinary non-preferential credits to legal status, in line with that made by other Member States, with international regulatory standards and with the proposals currently being made at the level of the European Union.
In particular, the use of an option permitted by the proposal for a Directive of the Parliament and of the Council amending Directive 2014 /59/EU of the European Parliament and of the Council permitting, as regards the order of priority of the non-guaranteed debt instruments in the event of insolvency, the advance incorporation of the international standard, as is apparent from Article 108 (4) and (5) of the text approved by the Council of the European Union and forwarded to the European Parliament.
In addition to the distinction made between preferential and non-preferential ordinary credits, the recast text of the Law of the Market of Values, approved by the Royal Legislative Decree 4/2015, of 23 of 23, is amended. (a) October, so that non-complex products are not considered to be the financial instruments of debt issued by credit institutions or investment services entities which in turn are eligible for internal recapitalisation in a context of resolution. In this way, greater investor protection is being granted in line with the new regulatory framework for resolution created at European level.
IV
This royal decree-law consists of four articles that modify, in the terms described in the previous tests, Law 13/1989, of 26 May, of Credit Union, Royal Decree-Law 16/2011, of October 14, by the creation of the Deposit Insurance Fund of Credit Entities, Law 11/2015, of June 18, of recovery and resolution of credit institutions and investment services companies and the recast text of the Law of the Securities Market, approved by the Royal Legislative Decree 4/2015 of 23 October.
Its final part consists of a single derogation provision and three final provisions governing, respectively, the enabling for regulatory dment and of the Council of 16 April 2014 on deposit guarantee schemes.
Thus, Law 11/2015 of June 18, of recovery and resolution of credit institutions and investment services companies is amended, in order that the membership of an institution to an institutional system of protection can be taken into account for the purposes of determining the risk profile for establishing the minimum requirement for own funds and eligible liabilities, whether the institutional protection system is provided for in the additional provision 5. Law 10/2014 of 26 June of the management, supervision and solvency of credit institutions, such as Article 113.7 of Regulation EU 575/2013.
The Royal Decree-Law 16/2011 of 14 October, establishing the Deposit Insurance Fund for Credit Entities, is also amended in order to adapt the contributions to the Deposit Insurance Fund to the the establishment of an i evelopment of the standard, the competences under the laws of the Member States. the actual decree-law, and its entry into force, which will take place on the day following its publication in the "Official Gazette of the State".
V
The notes of extraordinary and urgent need that must accompany the approval of a real decree-law concourse both in the normative modifications made to carry out the introduction of the institutional systems of protection in the scheme of credit unions as in the amendment of the additional provision of the 14th of Law 11/2015, of 18 June, of recovery and resolution of credit institutions and investment firms.
As far as credit unions are concerned, in light of the risks facing the financial system and its impact on recent experiences, it is urgent and necessary to provide these institutions with instruments to facilitate to avoid its resolution or liquidation, with the consequences that it has on competition, financial inclusion and local economic activity. These instruments require for their implementation the adoption of a series of measures and actions so that as soon as they can be initiated, for which the approval of this royal decree-law is indispensable, before they will be available for entities.
With regard to the introduction of the distinction between preferential and non-preferential loans, as has already been pointed out, credit institutions and investment firms are bound by the rules. (a) to include in its balance sheets a high number of liabilities which meet certain characteristics which favour the absorption of losses in the case of the resolution of an institution. Counting on these liabilities is an obligation already in place, which will be strengthened by the regulatory changes currently being undertaken at the level of the European Union to meet international standards.
In addition, in addition to the minimum requirement for own funds and eligible liabilities at the level of the European Union (the MREL), globally systemic entities are obliged to comply with the total capacity rule. (a) the loss absorption (TLAC) published in the framework of the Financial Stability Board of 9 November 2015 and adopted a week later at the G20 Summit in Turkey. Precisely in order to adapt Directive 2014 /59/EU to these new international standards, the European Commission adopted on 23 November 2016 a proposal for a Directive amending Directive 2014 /59/EU as regards order the priority of the unsecured debt instruments in the event of insolvency.
As a consequence of the requirements described, institutions will have to face, in the coming months, important demands for eligible liabilities to absorb losses, which they will have to place in the markets. The non-preferential senior debt market has, like all markets, a limited capacity to absorb operations. In addition, the rates required by the placement of these issues vary, especially in relation to a newly created financial instrument class. Therefore, institutions should stagger their emissions in such a way that the market can absorb them progressively and at reasonable prices.
In view of the demands that European and international standards impose, the effort that their compliance can bring to the obliged entities and the fact that the market does not have the capacity to absorb indiscriminately the necessary emissions, practically all the countries of our environment and with a financial sector comparable to the Spanish (France, Germany, Italy) have already adopted, in a short period of time, forecasts of similar nature, with the effect (a) positive that from the point of view of competition it implies for its credit institutions and to give the resolution regulations an even greater effectiveness. In fact, as mentioned above, and for the reasons set out so far, the proposal of the European Commission for a Directive on the order of priority for debt instruments in the event of insolvency provides for the possibility of approve, before the completion of the processing of the proposal for a directive, national schemes of senior non-preferential debt, provided that they assume to accommodate national legislation to European standards which, in turn, collect standards International Financial Stability Board.
However, Spain does not expressly provide for the existence of the figure of non-preferential ordinary credit, nor has it been applied, except in cases of contractual subordination inspired by the principle of the autonomy of the will, a the general clause of subordination to the senior debt which of legal certainty and allows the standardization of the conditions of this type of credits. This situation places Spanish entities at a serious disadvantage when designing their balance sheet in order to meet the minimum amount of liabilities payable.
The entities of the countries in our environment are already placing emissions of this type in the market, so waiting for the definitive approval of the European Union regulations can be complex, and at a cost significantly higher, in order for Spanish credit institutions to comply with the obligation to include such liabilities in their balance sheets.
This is particularly relevant in view of the fact that the alternative for entities in the face of difficulties in reaching a minimum volume of eligible liabilities, to the extent that the requirement is calculated in terms of risk-weighted assets is to reduce its balance sheet by way of fundamentally the reduction of the credit granted, with the resulting negative effects on the real economy and employment.
In this context, it is necessary to provide for the earliest possible legal framework for the collection of liabilities in order to comply with the new legal obligations in a scenario in which institutions have precise obligations to (a) in this respect and in which the consequences of not complying with these requirements have a considerable impact and may be particularly serious.
The rules that in this royal decree-law are modified are covered by the competition titles contained in the rules to be modified.
In the measures taken in the present royal decree, the circumstances of extraordinary and urgent need demanded by Article 86 of the Spanish Constitution as an enabling budget for the use of the normative figure.
The adoption of this royal-decree law responds to the principles of good regulation. From the point of view of the principles of necessity and effectiveness, it is intended to allow certain credit institutions to adopt policies and strategies to improve their resistance to the risks that may arise in the exercise of their activity, how to facilitate compliance with the requirements laid down by the new financial regulation being implemented at international and European level. With regard to the principle of proportionality, this is the minimum necessary regulation to promote credit unions with formal cooperation mechanisms and firm commitments to address the difficulties of their institutions. Similarly, in the case of senior non-preferential debt, this is an essential regulation for the Spanish entities to face up to the new international requirements of their direct competitors on an equal footing with their direct competitors. own resources and liabilities payable. In both cases, it is also pursued to consolidate legal certainty by providing the entities with a regulatory framework to deal with both realities. The reforms are finally in line with the requirements of the principle of transparency and efficiency, not only because they do not establish administrative burdens but because a regime is established that allows institutions to adopt their policies and strategies. with a clear framework.
In its virtue, in use of the authorization contained recedence to the rest of the ordinary claims provided for in Article 89.3 of Law 22/2003, of 9 July, Insolvency, those resulting from debt instruments which comply with the following conditions:
(a) that have been issued or created with an effective maturity of one year or more;
(b) other than derivative financial instruments or have implied derivative financial instruments; and
(c) that the terms and conditions and, where applicable, the prospectus relating to the issue, include a clause in which it is established that they have a lower insolvency ranking compared to the rest of the ordinary claims; credit derivatives of these debt instruments will be satisfied after the remaining ordinary claims.
Ordinary claims that meet the conditions listed in the preceding letters will have a higher ranking than the subordinated claims included in Article 92 of Law 22/2003 of 9 July, and will be satisfied with prior to these.
3. The subordinated credits included in Article 92.2. of Law 22/2003, of July 9, will have the following ranking:
(a) The principal amount of subordinated debt other than additional Tier 1 or Tier 2 capital.
b) The principal amount of Tier 2 instruments.
c) The principal amount of Tier 1 additional capital instruments. "
Article 4. Modification of the recast text of the Securities Market Act, approved by the Royal Legislative Decree 4/2015 of 23 October.
The recast text of the Securities Market Law, approved by the Royal Legislative Decree 4/2015 of 23 October, is amended in the following terms:
Article 217 (3) is worded as follows:
" 3. For the purposes of this Chapter, non-complex financial instruments shall not be considered:
(a) securities giving the right to acquire or sell other marketable securities or to give rise to their cash settlement, determined by reference to marketable securities, currencies, interest rates or yields, commodities or other indexes or measures;
(b) the financial instruments referred to in Article 2 (2) to (8); and
(c) the financial instruments referred to in Article 2.1.c) which in turn are eligible liabilities for the internal recapitalisation in accordance with the provisions of Section 4. of Chapter VI of Law 11/2015 of 18 June 2015; recovery and resolution of credit institutions and investment firms. '
Single Repeal Disposition. Regulatory Repeal.
As many rules of equal or lower rank are repealed, they oppose or contradict the provisions of the actual decree-law.
First Disposition first. Enabling for regulatory development.
1. The Government may lay down the regulatory standards necessary for the development of the provisions of this royal decree-law.
2. The Bank of Spain shall develop before [30 September 2017] the methods necessary to ensure that the annual contributions of the entities to the deposit guarantee compartment of the Deposit Insurance Fund are proportional to their risk profiles, including in such methods the new factor described in point (e) of Article 6.3 of Royal Decree-Law 16/2011 of 14 October establishing the Credit Entities Deposit Insurance Fund.
As long as the Banco de España does not develop such methods, the annual contributions will be calculated in accordance with the provisions, prior to the modification introduced by this royal decree, in the Royal Decree-Law 16/2011, 14 October, for which the Credit Entities Deposit Guarantee Fund is created.
Final Disposition second. Competential title.
The rules that in this royal decree-law are modified are covered by the competition titles contained in the rules to be modified.
Third final disposition. Entry into effect.
This royal decree-law will enter into force on the day following its publication in the "Official State Gazette".
Given in Madrid, on June 23, 2017.
FELIPE R.
The President of the Government,
MARIANO RAJOY BREY
