Royal Decree-Law No 17/2014 of 26 December 2014 on measures for the financial sustainability of autonomous communities and local and other economic entities creates the Fund for the Financing of Autonomous Communities and the Fund Financing to Local Entities.

Accession to the Fund for the Financing of Autonomous Communities, whether in its financial facility or the Autonomous Liquidity Fund, entails the subjection to the conditions of financial prudence in the terms it establishes the General Secretariat of the Treasury and Financial Policy. In addition, in accordance with the aforementioned Royal Decree-Law 17/2014, transactions in securities and long-term credit operations shall require the express authorisation of the General Secretariat of the Treasury and Financial Policy.

On the other hand, the Royal Decree-Law 17/2014 modifies, through its final disposition, the recast text of the Local Law Regulatory Law, approved by Royal Legislative Decree of March 5, establishing the "all financial transactions that are subscribed to by the Local Corporations are subject to the principle of financial prudence", with the definition of that principle being defined in the General Secretariat of the Treasury and Financial Policy financial liabilities.

This Resolution defines the principle of financial prudence applicable to the financial operations of the Autonomous Communities attached to the Fund for the Financing of Autonomous Communities and to the set of local entities. For the definition of this principle, this General Secretariat has taken into account the principle of sustainability of public finances as set out in Article 4 of the Organic Law 2/2012 of 27 April, of budgetary stability and Financial Sustainability, which ensures the ability of the Public Administrations to finance their present and future spending commitments within the limits of deficit, public debt and commercial debt delinquencies.

For all of the above, this General Secretariat has resolved:

First. Scope and principle of financial prudence.

The Autonomous Communities that join the Fund to Finance Autonomous Communities in accordance with Royal Decree-Law 17/2014 of 26 December 2014 on measures for the financial sustainability of the Autonomous Communities and entities Local and other economic activities, as well as all local entities, may only conclude debt and financial derivative transactions in the terms set out in the following paragraphs.

For the purposes of this Resolution, both the Autonomous Community and the Local Entity and the rest of entities, agencies and entities dependent on the local authority and local authority are defined by the Autonomous Community and local authority. those, including in the general government sector, sub-sector Autonomous Communities and sub-sector Local Corporations, in accordance with the definition and delimitation of the European System of National and Regional Accounts of the European Union.

Second. Instruments.

1. Autonomous communities and local entities within the scope of this Resolution may carry out borrowing operations through, inter alia, the following instruments:

a) Certificates of Debt under German law (Schuldschein).

(b) Securities or non-marketable securities issued by public or private issuance on wholesale or retail markets.

c) Short-term financing instruments.

d) Long-term loans.

e) Financial lease.

In addition, autonomous communities and local entities may use other instruments expressly authorized by the General Secretariat of the Treasury and Financial Policy provided that they conform to the conditions of the present Resolution.

2. In any case, the autonomous communities attached to the Fund for the Financing of Autonomous Communities shall be applicable to Articles 19.1.a) and 24.b) of Royal Decree-Law 17/2014, according to which " they will not be able to carry out operations in securities or credit operations in the long term, unless expressly authorised by the General Secretariat of the Treasury and Financial Policy without prejudice to the mandatory authorisation of the Council of Ministers in accordance with Article 14 of the Law Organic 8/1980, 22 September Financing of the Autonomous Communities ".

Third. Financial conditions for borrowing operations.

1. The maximum total cost of borrowing operations, including fees and other charges, other than the fees referred to in paragraph 3 of this Article, shall not exceed the cost of financing the State within the time limit of the operation. in the differential that corresponds to the administration type, as defined in the following section.

The autonomous communities, and those local entities that have their own valuation tools or independent external advice, will determine at the time of the operation the cost of Treasury financing on the basis of the the methodology contained in Annex 2 to this Resolution.

Other local entities, to know the cost of State financing at each time, will use the fixed rate table or the applicable maximum differentials for each reference that I publish monthly, using Resolution, the General Secretariat of the Treasury and Financial Policy. The maximum published costs will remain in force until new costs are published. Compliance with the maximum cost condition shall be considered at the time of signature of the documents that oblige the parties and provided that the provision of the funds by the borrower can be made without any restriction.

2. The maximum differentials on the cost of State funding will be:

a) For the Autonomous Communities attached to the Financing Fund for Autonomous Communities:

i. Operations whose maturities are covered by the Fund for Autonomous Communities: 20 basis points.

ii. Operations whose maturities are not covered by the Fund for Autonomous Communities: 30 basis points.

b) For local entities:

i. Operations whose maturities are covered by the Financing Fund to Local Entities (Management Fund or Economic Impulse Fund): 20 basis points.

ii. Transactions whose maturities are not covered by the Financing Fund to Local Entities:

a) Concerted Operations by Local Entities that meet eligibility conditions to the Economic Impulse Fund: 40 basis points.

b) Concerted operations by Local Entities that do not meet eligibility conditions to the Economic Impulse Fund: 75 basis points.

c) In the case of debt transactions with an average life of more than ten years, the maximum differentials set out in the previous point may be increased by an additional basic point per year, up to a maximum of 15 additional basic points.

3. For the maximum rates described in the previous paragraph, only the following commissions may be added:

a) Commission of non-availability in credit policies, limited to a maximum of 0.10% per year.

b) Agency Commission for syndicated operations, with a maximum of 50,000 euros per year.

4. Interest on late payment may not exceed the interest rate of the operation plus a surcharge of 2% per year.

5. Operations eligible to be covered by the Local Entities Financing Fund will have a repayment plan in which the interest settlements will match the maturity dates of the principal.

Fourth. Transactions in financial derivatives.

1. Permutas, options and futures of interest rates and exchange rates may be contracted according to the standard market conditions.

2. In the event of a debt transaction in currency other than the euro, the exchange rate risk shall be covered by a financial swap contract, unless there is a natural hedge. The cost of that financial swap shall be incorporated in the calculation of the total cost of the operation, which shall not exceed the limit set in the third subparagraph.

In the case of debt transactions made in a currency other than the euro prior to the entry into force of the Financing Funds to Autonomous Communities and to Local Entities, the risk may be covered currency in standard market conditions.

3. In the case of Local Entities, the provisions of paragraphs 1 and 2 of this Article shall apply without prejudice to the provisions of the Local Government Regulations.

4. The use of more complex financial derivatives shall be regulated in accordance with the provisions of Article 6 of this Resolution.

5. In no case can they be hired:

(a) Financial derivatives without a maximum cost whatever the scenario, except in the case of financial swaps of interest rates or interest rate options at risk of assuming a variable rate without differential penalizer.

(b) Financial derivatives where the risk of any price index is assumed except where the purpose of the derivative is the elimination of the said risk.

(c) Financial derivatives that represent a difference in the financial burden or an increase in funding. Where, as a result of the restructuring of a financial derivative, or of a fixed rate loan constructed from a variable interest rate financing and an implicit variable interest rate swap, a cost of the breakdown payable by the corresponding administration may be passed on to the new fixed rate of the restructured derivative, or to the new fixed rate of the fixed rate loan, as appropriate, without this being considered a deferral in the financial burden or an increase in funding. In addition, the new type may exceed the limits set in the third paragraph only by the part corresponding to the cost of the break-up.

d) Financial derivatives contracted out of reasonable market prices. In order to assess this, the Autonomous Community or Local Entity must have its own valuation tools or have independent external financial advice.

e) Financial derivatives containing early-resolution clauses as a result of a credit rating downgrade.

6. The formalisation of financial derivatives will require the signing of a standard framework contract to collect the rights and obligations associated with these transactions and may also subscribe to a standard collateralisation contract in the market.

7. Derivatives contracted prior to the entry into force of this Resolution and which would not have expired, shall remain subject to the corresponding ISDA, CMOF or similar standard contracts that were in force at the time of the procurement. Any migration of these derivatives to the new framework contracts specified in the previous paragraph may not in any case result in any disbursement from the Autonomous Community or local entity.

Fifth. Bans:

Those borrowing operations will be prohibited with the following characteristics:

(a) Those that include derivatives implied in the contracts, including early repayment options at the request of the financial creditor. Fixed interest rate financing operations constructed on the basis of variable interest rate financing and an implicit variable interest rate swap shall be permitted if they respect the other conditions laid down in the Resolution.

(b) Those whose financial structure involves a deferral of the financial burden.

(c) Those containing "trigger" clauses linked to credit ratings or other economic-financial variables that involve the early repayment of the debt or a change in the financial terms of the debt. Only the "trigger" clauses of the applicable interest rate shall be valid, in the case where the maturities of the borrowing operations shall cease to be covered by the Financing Funds to the Autonomous Communities and to the Local entities because the corresponding administration decided to leave the Fund. In no case can the interest rate increase by more than 20 basis points for Autonomous Communities, or contravene the maximum cost of operations not covered by the Financing Fund to Local Entities, as established in the Article 3 (2) (b) of this Resolution.

d) Those arising from the subrogation of the General Administration in financial contracts from its public bodies and entities which assume the assumption of debts previously guaranteed by the Administration itself, provided that This subrogation assumes an increase in the cost of the pre-existing operation.

e) Those arising from the subrogation of the General Administration or one of its entities in other debts which are not of a financial nature or which do not have an explicit endorsement by the Administration concerned, and the cost of which is above the cost of the equivalent term debt held by the Autonomous Community or Local Entity on the date on which the original transaction was closed. The establishment of assumption or subrogation commissions in these operations will also be prohibited.

(f) Those arising from the transformation of debts of a non-financial nature from the Autonomous Community or Local Entity, in other financial ones whose cost is above the cost of the term debt equivalent to the Autonomous Community or Local Entity on the date the original operation was closed.

(g) Those arising from the modification of a prior contract of the Autonomous Community or Local Entity, or of its public entities, in which the cost of the operation exceeds the cost of the operation. pre-existing. In any event, the maximum financial cost shall be that set out in the third point of this Resolution.

h Those that do not provide for the possibility of early repayment at the request of the debtor. Transactions at the variable rate of interest shall not include costs of breakdown by early repayment on interest payment dates. In the event that early repayment occurs on dates other than interest payments, the inclusion of a break cost is allowed, provided that such cost is calculated on the basis of market practice.

Fixed-interest-rate financing operations may include breaking costs in favor of one or any of the parties, regardless of whether early repayment is made on interest payment dates. In any event, such break-up costs should reflect exclusively the economic injury of the cancellation of the transaction due to the change in the conditions of the interest rate swaps from the formalisation or disbursement of the loan. until the time of the amortisation of the same (or what is the same, the cancellation of the financial swap of interest rate-fixed implicit), without incorporating the risk premium of the transaction (equivalent to the risk premium which would be the loan of being this at a variable rate) for the period remaining from the date of the amortisation anticipated up to the date of the amortisation expected in the contract initially.

i) Those transactions at the variable interest rate which contain ground clauses on the applicable reference, unless the Autonomous Community or Local Entity is compensated in the differential applicable to the transaction for the sale of that option is ground at market prices.

j) Variable interest rate debt transactions where the reference euribor used does not coincide with the interest settlement period, unless the market adjustment of the margin is included in the contract. the reference used and the appropriate reference to the interest settlement period.

Sixth. Exceptional assumptions.

1. By way of exception, the Secretary-General of the Treasury and Financial Policy, within the scope of this Resolution and on the basis of the financial conditions of the operation, may authorise debt and community derivative operations. Autonomous regions and local authorities which do not require authorization for their implementation under the rules of local government, which do not comply with the conditions of this resolution, without prejudice to the mandatory authorisation of the Council of Ministers, in accordance with Article 14 of the Organic Law 8/1980, of 22 September, Financing of the Autonomous Communities.

2. In the case of the borrowing operations of Local Entities other than those of point 1 and which do not comply with the conditions of this Resolution, the Secretary-General of the Treasury and Financial Policy shall issue a mandatory report and binding the General Secretariat for the Autonomous and Local Coordination or, as the case may be, the competent authority for the financial protection of local entities, in which it shall be valued, in the field of this resolution and on the basis of the financial conditions of the operation, compliance with the principle of financial prudence.

3. In the cases referred to in paragraphs 1 and 2 of this Article, the autonomous community or local entity shall submit a report detailing the financial expediency of the operation, justifying that it does not put its solvency at risk. financial. In the case of complex derivative operations, the memory shall contain an explanation of the operation of the derivative and the purpose pursued. Derivatives shall not be authorised or reported for which the knowledge of their operation or their suitability for the purpose pursued is not sufficiently justified.

Seventh. Reporting obligations.

1. The autonomous communities and local authorities have an obligation to communicate monthly the final terms of all debt and derivative transactions and the global debt and derivatives portfolio to the Ministry of Finance. Hacienda y Administraciones Públicas, in accordance with the template provided by the General Secretariat of the Treasury and Financial Policy. This information will be forwarded to the General Secretariat of the Treasury and Financial Policy.

2. The General Secretariat of the Treasury and Financial Policy may request the autonomous communities or local authorities to authorize financial institutions to provide the Secretariat General with information on the risk each entity maintains with the corresponding Autonomous Community or local entity, as well as the main features of such operations.

Eighth. Repeal clause.

The Resolution of 5 September 2014, of the General Secretariat of the Treasury and Financial Policy, defining the principle of financial prudence applicable to the debt operations of the communities is repealed. Autonomous Liquidity Fund (s) to be collected.

Ninth. Entry into force.

This Resolution shall enter into force on the day following its publication in the "Official State Gazette".

Madrid, 5 February 2015. -Secretary General of the Treasury and Financial Policy, Rosa María Sánchez-Yebra Alonso.

ANNEX 1

Fixed and differential interest rates on the cost of State financing for the purposes of compliance with the third paragraph of the Resolution of 5 February 2015, of the General Secretariat of the Treasury and Financial Policy

14

19

84

168

252

264

life of operation (months)	Maximum fixed rate	Maximum Differential over euribor twelve months	Maximum differential over euribor six months	Maximum differential over euribor three months	Maximum different over euribor a month
					4
2	0.00				3
			-5	3
	4	0.05			-1	7
5	0.07			2	10
			0.08	-6	2	10
	7	0.10		-5	3	11
0.11			3	11
9	0.11		-5	4	12
10	0.10		-6	2
0.12		-4	5	13
12	0.15	-14	-1	8	16
13	0.16		0	9
0.17	-12	1	10	17
	15	-11	-11	2	10	18
16	0.19	-10	3	11	19
17	0.20	-8	4	13	21
	18	-7		6	14	14
0.23	-5	8	16	24
20	0.25	-3	9	18	26
		-1		11	20
22	0.29	1	13	22	30
23	0.31	3	16	24	32
	0.34			18	18
0.51	19	32	40	48
	48	29		29	41	50	58
60	0.85	41	53	62	70
72	1.00	49	61	70	78
55		66	75	55	55
	1.29	62	74	82	90
108	1.39	65	77	93	93
120	1,50	69	80	89
1.62	74	86	94	102
144	1.73	80	92	100	108
156	1.82	85	96	105
1.90	88	100	108	116
	180	89	89	101	110	117
192	2.00	91	102	111	119
204	2.05	92	104	113	120
	216	2.09	94	106	114
2.14	97	108	117	125
240	2.19	99	111	120
2.23	102	114	122	130
2.28	105	116	125	133
276	2.30	106	117	126	134
	288	2.33	107	118	127	135
300	2.35	108	119	128	136
	312	2.38	110	122	131	138
324	2.42	114	125	134	142
336	2.45	115	127	135	143
348	2.47	117	129	137	145
≥ 360	2.49

Fixed interest rates and maximum applicable differential rates for operations whose exact average life is not published in this table shall be subject to linear interpolation between the two most different types or spreads. close to the average time of the operation.

For these fixed or differential interest rates on euribor, the maximum spreads contained in Article 3 (2) of this resolution may be applied.

ANNEX 2

Methodology for the calculation of the cost of State funding for each period

For fixed interest rates:

a) The profitability (Yield to Maturity Mid) of the closest Treasury references in a financial information source is sought.

b) The return to the term of the new operation is linearly interpolated.

For variable interest types:

a) The profitability (Yield to Maturity Mid) of the closest Treasury references in a financial information source is sought.

b) The equivalent of these rentings is calculated in terms of spread over euribor six months through the I-spread function and not by the Asset swap spread.

c) With the spread over euribor six months of the two Treasury references closer to the deadline of the new operation, the time-line for the new operation is linearly.

d) If you want to set the spread over another Euribor reference other than the six-month euribor (twelve months, three months, and one month), it is adjusted by the basis swap to the time of the transaction.