JOHN CARLOS I

KING OF SPAIN

To all who present it and understand it.

Sabed: That the General Courts have approved and I come to sanction the following law.

EXPLANATORY STATEMENT

Financial stability is one of the central pillars of the design of the single European financial market. To this end, sustained in the exercise of safe prudential supervision, the convergence promoted by the European institutions has already contributed, both in terms of common basic standards and practical implementing instruments. This is a tangible reality, in which the Financial Services Action Plan, launched by the European Commission, has been decisively involved.

In the framework of this plan, the need to provide an adequate response to the proliferation of cross-sector groups encompassing credit institutions, investment services companies and entities was addressed. insurers. This intensification of the links between the three traditional financial sectors was a double problem. Firstly, it led to the emergence of new risks or, at least, could increase existing risks. It was therefore necessary to adopt appropriate and proportionate regulation of these risks. Secondly, this new regulation should be implemented in a harmonised way, as it can be no less within the framework of a single financial area, which would also correct the inconsistencies between the sectoral legislation.

The starting point was very poor. While the "homogeneous" groups of financial institutions were sufficiently covered by sectoral prudential supervision rules in full and satisfactory operation, the "heterogeneous" groups lacked a complete regulatory body, in addition, there are numerous inconsistencies between the sectoral legislation (where there are no gaps) applicable to the entities in those groups.

In Spain, on the contrary, the situation of departure was much more satisfactory. Since 1992, a system of joint prudential supervision of the activities of the groups developing the three types of financial business: banking, securities and insurance has been operating in our legal system. These groups have received the designation of non-consolidated mixed groups. The explanatory memorandum of Law 13/1992 of 1 June 1992 on own resources and supervision on a consolidated basis of financial institutions described this decision as follows: ' ... it seemed appropriate to incorporate a final Chapter allowing for to monitor in particular the effective level of own resources and risk concentration of those mixed groups within which financial institutions or groups exist which, in accordance with their specific rules, do not have to consolidate their states accounting. In this Chapter, it is therefore a sort of consolidation of limited scope which, pursuing objectives similar to those of the traditional supervisory technique on a fully consolidated basis, would not be in the serious difficulties of implementing this Chapter. last to entities, such as insurers and other financial institutions, whose activity and risks are so dissimilar. " The aforementioned law already provides for a set of special surveillance rules applicable to non-consolidated mixed groups. This set is structured, on the one hand, on a number of solvency requirements additional to those set out in the sectoral framework (individual or consolidated) for banking, securities and insurance institutions, and on the other, the designation of a supervisory authority responsible for monitoring its compliance and for the establishment of a cooperation procedure to take, where appropriate, the necessary measures to ensure compliance.

Meanwhile, at the Community level, the progress was much more modest, without any harmonization standard. On the ground, the ground was paid for the work of the G-10 Joint Forum on Financial Conglomerates and the Report of the European Union Financial Economic Stability Committee (Brouwer Report). The Commission was able to summarise the previous contributions and developed a set of work which eventually led to the adoption of Directive 2002/87/EC of the European Parliament and of the Council of 16 December 2002 on the supplementary supervision of credit institutions, insurance undertakings and investment firms in a financial conglomerate and amending Directives 73 /239/EEC, 79 /267/EEC, 92 /49/EEC, 92 /96/EEC, 93 /6/EEC and 93 /22/EEC of the Council Directive 98 /78/EC and Directive 2000 /12/EC of the European Parliament and of the Council. This Law is part of the partial incorporation of that Directive into Spanish law.

The Law therefore responds to the fundamental objective of establishing a specific prudential regime applicable to financial conglomerates. There is, however, a secondary objective: to move towards greater coherence between the various sectoral legislations, which apply to the 'homogeneous' groups, and between them and the financial conglomerates themselves. These sectoral regulations, to which the text of the Law makes continuous references, would be the one contained, for credit institutions, in Laws 13/1985, of 25 May, of coefficients of investment, own resources and obligations of information of the financial intermediaries, and 26/1988, of 29 July, on the discipline and intervention of credit institutions; for the securities market, in Law 24/1988, of 28 July, of the Securities Market, and for the insurance sector, in the recast text of the Law on the Management and Supervision of Private Insurance, approved by the Royal Legislative Decree 6/2004, of 29 October. To them, the recast text of the Law on the regulation of pension plans and funds, approved by the Royal Legislative Decree 1/2002 of 29 November, and Law 35/2003 of 4 November, of institutions of collective investment, should be added.

Chapter I is dedicated to the first of the outstanding objectives: the design of a new supervisory system to which credit institutions, investment firms and insurance companies will be subject to reinsurers, as well as the management companies of collective investment institutions and pension fund management entities (which both the Directive and the Law generally refer to as "regulated entities") integrated into a financial conglomerate. Thus, a definition of a financial conglomerate is first provided, based on the already classic group definition offered by Article 4 of the Law 24/1988, of July 28, of the Stock Market. The following are the vertebral elements of such supervision: solvency, capital adequacy policies, risk concentration, intra-group transactions and risk management procedures and internal control mechanisms.

Articles 5, 6 and 7 provide for a set of measures aimed at facilitating the exercise of supplementary supervision. It is a question of creating the figure of the coordinator, as the competent authority to whom the coordination of the supervisory activity will correspond, in a framework in which a multitude of authorities can come to attend, if the financial conglomerate presents a a high degree of sectoral and territorial diversification. The system is supplemented by cooperation and consultation obligations between all the competent authorities involved in the supervision of the same financial conglomerate.

Article 8 deals with the problem of financial conglomerates in third countries, whose regulated entities operate in Spain. The principle of reciprocity is the axis that explains the regime applicable to this type of entity.

Chapters II, III and IV respond to the second of the objectives set out in the Directive, and are dedicated to credit institutions, the securities market and the insurance sector, respectively.

CHAPTER I

Of Financial Conglomerates

Article 1. Object.

The regulated entities in financial conglomerates shall be subject to the additional supervisory regime provided for in this Act and its development provisions, which shall apply to other entities in the terms therein. indicated.

Article 2. Definitions.

1. A group shall be deemed to constitute a financial conglomerate where the following circumstances are simultaneously present:

(a) that the parent entity of the group is a regulated entity or, if not, that the activities of the group are primarily developed in the financial sector, as set out in paragraph 4 of this Article; and at least one of the dependent entities is a regulated entity, as set out in paragraph 3 of this Article.

(b) At least one of the entities in the group belongs to the insurance sector and at least one other belongs to the banking or investment services sector.

(c) The consolidated or aggregated activities of the group entities included in the insurance sector and those of the group entities included in the banking and investment services sectors are: significant, as provided for in paragraph 5 of this Article.

Any subgroup of a group, which meets the conditions set out in the preceding letters, shall also be considered a financial conglomerate.

2. For the purposes of this Law, entities shall be understood to belong to the same group of entities:

(a) Constituency a unit of decision, in the terms provided for in Article 4 of Law 24/1988, of 28 July, of the Securities Market,

b) Keep a stake. Participation shall mean any right to the capital of other companies which, by creating a lasting relationship with them, is intended to contribute to the activity of the company and, in any event, the holding, directly or indirectly, of at least 20 percent of the capital or voting rights.

In the group, all entities that maintain the links mentioned in the preceding letters, whatever their nationality, domicile or legal nature, and regardless of the country where they develop, will be integrated into the group. their activities.

3. For the purposes of this Law, credit institutions, investment firms, the management companies of collective investment institutions, pension fund management entities and the institutions shall be regulated entities. insurance and reinsurance entities.

Regulated entities will understand:

(a) The Spanish registered in the special registers by the Banco de España, the National Securities Market Commission and the General Directorate of Insurance and Pension Funds.

(b) Those authorised in other Member States of the European Union.

(c) Bodies or undertakings, both public and private, which have been authorised in third States, when they carry out activities reserved for credit institutions, investment firms, entities insurers and reinsurers, management companies of collective investment institutions and pension fund management entities.

4. The activities of a group shall be understood to be primarily in the financial sector where the ratio of the total balance sheet of the financial sector entities, whether regulated or not, of the group and the total balance sheet of the group as a whole is more than 40 percent.

5. Activities in a financial sector shall be understood to be significant if the average of the ratio between the total balance sheet of that sector and the total balance of the financial sector entities in the group and the financial sector is greater than 10%. the ratio between the solvency requirements of that sector and the total solvency requirements of the financial sector entities in the group.

The requirement laid down in paragraph 1 (c) shall be deemed to be equally satisfied if the total balance sheet of the group's smaller financial sector is more than EUR 6 billion. Regulations shall determine the assumptions in which, if the threshold provided for in this subparagraph is exceeded, and not as referred to in the preceding subparagraph, the group may not be considered as a financial conglomerate or may not be provisions set out in points (c), (d) and (e) of Article 4 (1).

For the purposes of this Law, the smaller financial sector of a group will be the sector with the lowest average and the most important financial sector will be the sector with the highest average. For the calculation of the smallest and most important financial sector, the banking and investment services sectors will be considered together.

6. In cases and in accordance with the requirements to be laid down in regulation, the total balance sheet may be replaced or supplemented by the ratios set out in paragraphs 4 and 5 by either of the following two or one of the following parameters:

a) The revenue structure.

b) Off-balance-sheet activities.

In order to avoid sudden changes in the regime of financial conglomerates already subject to additional supervision, in the event that the aforementioned ratios are less than 40 percent and 10 percent, respectively, for the next three years, the 35 percent and 8 percent ratios will apply to the financial conglomerate. Similarly, if the total balance of the smaller financial sector falls below EUR 6 billion, a threshold of EUR 5 billion will be applied.

During the period provided for in the preceding paragraph, the coordinator, with the agreement of the other relevant competent authorities, may decide to cease to apply the lowest ratios or the lowest amounts there. contemplated.

7. The dominant undertaking which is not a regulated entity and which, together with its subsidiaries, of which at least one is a regulated entity, and other entities, constitutes a conglomerate, shall be regarded as a mixed financial holding company. financial.

8. For the purposes of Articles 5 et seq., the competent authorities of a financial conglomerate shall be the national authorities of the Member States of the European Union empowered by laws or regulations to to monitor regulated entities domiciled in their respective territories, both individually and on a consolidated basis.

Article 3. Scope of application.

1. Financial conglomerates will be subject to this Act in which:

a) The dominant entity is a Spanish regulated entity.

(b) The dominant entity is a mixed financial holding company with an address in Spain and at least one of the dependent entities is a Spanish regulated entity.

c) The dominant entity being a foreign mixed financial holding company, all the dependent entities are Spanish regulated entities or the regulated regulated entity is Spanish with the largest total balance sheet of the most important financial sector.

d) In the other cases, the regulated entity with the highest total balance in the most important financial sector is Spanish.

2. They will also be subject to the provisions of this Law and its implementing regulations:

(a) Spanish regulated entities forming part of a financial conglomerate subject to additional supervision by competent authorities of other Member States of the European Union.

(b) mixed financial holding companies with registered offices in Spain which are the dominant entity of the financial conglomerates referred to in point (a) above.

(c) regulated entities whose dominant entity is a regulated entity or a mixed financial holding company that has its registered office outside the European Union, in the terms laid down in Article 8 of that Regulation; Law.

(d) regulated entities of groups other than financial conglomerates, in the terms provided for in Article 4 (3) of this Act.

Article 4. Elements of the additional monitoring.

1. Without prejudice to prudential requirements that are to be required individually or on a consolidated basis in accordance with the sectoral rules, regulated entities in financial conglomerates shall:

(a) To maintain at all times, at the level of the financial conglomerate, a sufficient volume of own resources or solvency margin in relation to the investments made and the risks assumed; lay down the criteria for the inclusion of financial institutions in the financial conglomerate for the purposes of calculating capital adequacy requirements, as well as the methods under which that calculation shall be made, which shall be from the sum of the solvency requirements laid down in the sectoral rules applicable to entities in the financial conglomerate.

b) Apply capital adequacy policies in the financial conglomerate.

(c) Respect the quantitative limits and other requirements that the Government may set or, with its specific rating, the Minister of Economy and Finance, the Banco de España and the National Securities Market Commission, each of (a) in its specific field, in relation to the concentration of risks of financial conglomerate entities, as well as to inform the coordinator of any significant risk concentration in the financial conglomerate.

d) Respect the quantitative limits and meet the qualitative requirements that the Government may fix or, with its specific rating, the Minister of Economy and Finance, the Bank of Spain and the National Market Commission Securities, each of them in their specific scope, in relation to the intra-group transactions of the entities in the financial conglomerate with each other and with the natural or legal persons with whom they maintain close links, as well as inform the coordinator on the significant intra-group transactions of the regulated entities in the financial conglomerate.

It is understood that there are close links when two or more natural or legal persons are bound by a control link, in the terms provided for in Article 4 of the Law 24/1988 of 28 July 1988 on the Securities, or for the fact that they have, directly or indirectly, or through a control link, 20 percent or more of the capital or voting rights of an entity.

e) Contar at the level of the financial conglomerate with appropriate risk management procedures and internal control mechanisms, as well as with good administrative and accounting organization.

2. Where the dominant entity in the financial conglomerate is a mixed financial holding company, the sectoral rules relating to the concentration of risks and intra-group transactions in the largest financial sector in the conglomerate Financial, if any, will apply to the whole of this sector including the mixed financial holding company.

3. Regulations may extend all or some of the obligations laid down in paragraph 1 to those groups which fulfil all the requirements referred to in Articles 2 and 3, except as provided for in Article 1 (1) (c). 2.

The groups that are subject to the aforementioned obligations shall also apply Articles 5, 6 and 7 of this Law, with the specifications to be determined regulatively.

4. Regulations shall determine the cases in which the supervisory authorities may require the fulfilment of all or some of the obligations referred to in paragraph 1, to those regulated entities in which one or more persons, (a) natural or legal entities, maintain holdings or capital links, or exercise significant influence, without constituting a group, within the terms laid down in Article 2, and take into account, for these purposes, the particularities of the cooperative or mutual groups.

5. Those who are in charge of administration and management in mixed financial holding companies shall be persons of recognised commercial and professional repute and shall have at least the appropriate majority, knowledge and experience to perform its functions.

The failure to comply with these requirements will determine the lack of suitability of the company to hold a significant stake in any regulated entity, and will be in line with the sectoral regulations. applicable to each of the regulated entities that are integrated into a financial conglomerate.

Article 5. Coordinator and obligated entity.

1. The exercise and coordination of the supplementary supervision of regulated entities in financial conglomerates subject to this Law shall correspond to a single coordinator, who shall be one of the authorities that have assigned surveillance functions. and supervision on the regulated entities that integrate them, in accordance with the provisions set out in the following paragraph.

2. Where the dominant entity of a financial conglomerate is a regulated entity, the function of coordinator shall be exercised by the competent authority entrusted with the supervision and supervision functions of the consolidated group in which it is is integrated or, in the absence thereof, of the entity itself considered individually.

In financial conglomerates whose dominant entity is not a regulated entity, the function of coordinator shall be exercised by the appropriate competent authority in accordance with the criteria to be established. regulentarily.

3. The functions of the coordinator in relation to the supplementary supervision of regulated entities in a financial conglomerate are as follows:

(a) Coordination of the collection and dissemination of relevant or essential information, including the dissemination of information that is relevant to the supervisory work of a competent authority in accordance with the sectoral rules.

b) General supervision and assessment of the financial situation of a financial conglomerate.

(c) The assessment of compliance with the obligations referred to in the previous article and its implementing rules.

d) The evaluation of the structure, organization, and internal control systems of the financial conglomerate.

e) The planning and coordination of supervisory activities where necessary for the purposes of supplementary supervision and, in any case, in serious situations.

f) The other functions attributed to you by this Law and its development provisions.

4. The presence of a coordinator who is responsible for the exercise of the duties conferred on him by this Law shall not affect the duties, powers and responsibilities which he or she attaches to the tasks of supervision and control. competent authorities the respective sectoral rules.

5. In each financial conglomerate there will be a Spanish obliged entity that will assume the duties arising from the relations of the conglomerate with the coordinator.

The parent entity shall be a must, if this is a credit institution, investment firm, insurance undertaking or mixed financial holding company. Failing this, it shall be the credit institution, investment firm or insurance undertaking of the financial conglomerate identified by the coordinator after consultation with the other competent authorities and hearing the financial conglomerate.

Article 6. Cooperation between competent authorities.

1. The competent Spanish authorities shall cooperate with each other and with the other competent authorities in the framework of the supplementary supervision of regulated entities in financial conglomerates subject to both this Act and the rest of the financial conglomerates. National legislation issued pursuant to Directive 2002/87/EC of the European Parliament and of the Council of 16 December 2002.

2. Whenever it is appropriate for them to perform the function of coordinator or to be responsible for the supervision on a consolidated basis of a group of financial institutions integrated into one of the financial conglomerates referred to in the previous paragraph, the competent Spanish authorities must establish coordination arrangements with the other competent authorities of the same financial conglomerate, and may restrict them to those deemed relevant, in accordance with the criteria laid down in the are determined to be regulated.

Such agreements may extend the functions of the coordinator and specify the procedures applicable to the decision-making process between the signatory competent authorities, as well as the cooperation procedures with other competent authorities.

They should also conclude agreements where, being competent authorities, they are required by the authorities of other European Union Member States to perform the functions described in the first paragraph of this section.

3. The competent Spanish authorities shall exchange any relevant or essential information for the exercise of supplementary supervision with the other competent authorities of the same financial conglomerate. The minimum extent of the collection and exchange of the information referred to in this paragraph shall be determined.

This information exchange regime may be extended to the central banks, the European System of Central Banks and the European Central Bank.

4. The competent Spanish authorities shall consult with the other competent authorities of the same financial conglomerate, on a prior basis, for the adoption of the following measures where they may be relevant for the exercise of their work. Additional monitoring:

(a) Changes in the shareholding, organisational or management structure of the regulated entities in the financial conglomerate, which require the approval or approval of the competent authorities.

b) Important sanctions or exceptional measures.

(c) Other that can be regulated.

The competent Spanish authorities may decide not to consult in cases of urgency or where such consultation may compromise the effectiveness of the decisions. In that case, they shall inform the other competent authorities.

5. The competent authority, whether Spanish or another Member State, which performs the function of the coordinator of a financial conglomerate may address directly the entities, whether regulated or not, of that conglomerate, in order to obtain any information which is relevant for the purposes of supplementary supervision. Where a requested information has already been provided to a competent authority under the applicable sectoral rules, the authority carrying out the function of the coordinator may obtain such information from that authority.

Without prejudice to the foregoing, the competent Spanish authorities, at the request of the competent authority carrying out the task of coordinator, shall request the entities domiciled in Spain, whether regulated or not, to financial conglomerates, any information that may be relevant to the exercise of their coordination work, and refer to it.

Similarly, the competent Spanish authorities carrying out the function of a conglomerate coordinator may request the competent authorities of other Member States of the European Union to provide any information that may be relevant for the purposes of supplementary supervision in relation to that dominant entity, or entities, whether regulated or not, of the conglomerate, domiciled in the relevant Member State.

6. The Minister for Economic Affairs and Finance may lay down the rules necessary to ensure proper coordination and collaboration, in the terms set out in this Article, between the competent Spanish authorities.

Article 7. Implementing measures.

1. Where the obligations laid down in Article 4 and their implementing rules are not met, where the solvency at the level of the financial conglomerate is met, or where the intra-group transactions or concentrations are compromised, the risks pose a threat to the financial situation of the latter, the same limitations as laid down in the regulation of the consolidable groups of financial institutions shall apply to the regulated entities.

2. The competent Spanish authorities shall have regard to the regulated entities of a financial conglomerate, and the coordinator in the case of mixed financial holding companies, the same powers as those laid down in the regulation of the consolidable groups of financial institutions.

3. The provisions of the foregoing paragraphs shall in any event be without prejudice to the application, where appropriate, of the penalties provided for in Law 24/1988 of 28 July 1988 on the Stock Market, Law 26/1988 of 29 July on discipline and intervention by credit institutions, the recast of the Law on the Law on the Management and Supervision of Private Insurance, approved by Royal Legislative Decree 6/2004 of 29 October, the recast of the Law on the regulation of plans and funds of the pension, approved by the Royal Legislative Decree 1/2002 of 29 November, and Law 35/2003, of 4 November, from institutions of collective investment.

The regulated entities of the groups referred to in Article 4 (3) may be penalised, in accordance with the rules set out in the preceding paragraph, for non-compliance with the obligations laid down in Article 4 (3) of the Treaty. which are subject to the provisions of this Law. For this purpose, the references contained in the rules referred to in the financial conglomerates shall be construed as referring to those groups.

Article 8. Groups of third States.

1. The competent Spanish authorities shall check whether regulated entities whose dominant entity is a regulated entity or a mixed financial holding company that have their domicile outside the European Union are subject to a supervision by an authority of a third country, equivalent to that provided for in this Chapter and its implementing rules, provided that they form part of a group which, if the rules contained in Article 2 are applied, would constitute a financial conglomerate.

The duty of verification referred to in the preceding paragraph shall only be carried out when, in accordance with the criteria laid down in Article 5 (2) and its implementing provisions, it corresponds to the Spanish authority. competent the coordinator function.

2. In the event that the existence of an equivalent supervisory regime is not assessed, the supervisory regime provided for in this Law and its provisions will apply to the regulated entities referred to in the previous paragraph. development.

By way of derogation from the previous paragraph, the Government and, with its specific rating, the Minister of Economy and Finance, the Banco de España and the National Securities Market Commission, in the field of their competences, may establish other methods for the supplementary supervision of the groups referred to in this paragraph, in respect of which they exercise the function of coordinator. Such methods shall include the power of the supervisory authorities to require the establishment of a mixed financial holding company having its registered office in the European Union.

The methods must meet the objectives of the additional supervision defined in this Law and be communicated to the other competent authorities and the European Commission.

CHAPTER II

Rules regarding credit institutions

Article 9. Amendment of Law 13/1985 of 25 May of coefficients of investment, own resources and reporting obligations of financial intermediaries.

Law 13/1985 of 25 May, of investment coefficients, own resources and reporting obligations of financial intermediaries, is amended as follows:

One. Paragraph 1 (c) of paragraph 3 (c), paragraph 4 (g) and Article 8 (5) shall be worded as follows:

" 1. In order to comply with the solvency ratio and, where appropriate, the limitations laid down in Articles 6 and 10, credit institutions shall consolidate their financial statements with those of the other credit institutions and financial institutions which constitute a unit of decision with them. For the same purposes, credit institutions which do not have dependent entities shall draw up financial statements in which they apply similar criteria to those of consolidation if they have holdings in the sense referred to in paragraph 1. Article 185 of the Law on Limited Companies, or, directly or indirectly, at least 20 percent of the capital or voting rights in another financial institution.

Consolidated groups of credit institutions shall have appropriate risk management processes and internal control mechanisms including sound administrative and accounting procedures, and all entities or undertakings that are Members shall have appropriate mechanisms in place to provide information that is necessary for compliance with the standards required for the group. "

" 3. (c) an undertaking whose principal activity is to have holdings in financial institutions, a natural person, a group of natural persons acting systematically in concert, or a non-consolidated entity in accordance with this Law; control of a number of financial institutions, at least one of which is a credit institution, and provided that the credit institutions are the largest in relation to the financial institutions, in accordance with the criteria laid down by the The Minister for Economic Affairs and Finance. "

" 4. (g) entities whose principal activity is the holding of shares or units, except in the case of mixed financial holding companies subject to supervision at the level of financial conglomerate. "

" 5. For the purposes referred to in paragraph 1 of this Article, insurance institutions shall not be part of the consolidated groups of credit institutions. '

Two. The first subparagraph of Article 9 (2) and Article 9 (3) shall be worded as follows:

" 2. The Banco de España, as well as the Autonomous Communities in the field of its powers, may require the institutions subject to consolidation of a consolidated group of credit institutions to be required to verify the information required. consolidation carried out, analyse the risks taken by the set of consolidated entities and assess the risk management processes and the internal control mechanisms of the group's members; they may also, with the same object, inspect your books, documentation, and records. "

" 3. The Banco de España, as well as the Autonomous Communities in the field of its powers, may request information from natural persons and inspect non-financial institutions with which there is a control relationship in the sense of established by paragraph 2 of the previous Article, for the purpose of determining its impact on the legal, financial and economic situation of credit institutions and their consolidated groups. In particular, and in the case of the dominant entity of a credit institution, the Banco de España shall carry out a general supervision of the transactions between the credit institution or its consolidable group and the dominant non-financial institution and their dependents. "

Three. A new paragraph 3 is added to Article 13 with the following wording:

" 3. The Bank of Spain shall check whether credit institutions whose dominant entity is a financial institution with its registered office outside the European Union are subject to supervision on a consolidated basis by a competent authority of a third country, which is equivalent to that provided for in this Law and its implementing legislation.

In the event that the existence of an equivalent supervisory regime is not assessed, the supervisory regime on a consolidated basis as provided for in the preceding paragraph shall apply to the credit institutions referred to in the preceding paragraph. this Law and its provisions for development.

By way of derogation from the preceding paragraph, the Banco de España may establish other methods for the supervision on a consolidated basis of the groups referred to in this paragraph. Such methods shall include the power of the Bank of Spain to require the establishment of a dominant financial institution having its registered office in the European Union.

The methods must meet the objectives of the consolidated supervision defined in this Law and be communicated to the other competent authorities involved and to the European Commission. "

Article 10. Amendment of Law 26/1988 of 29 July on the discipline and intervention of credit institutions.

Law 26/1988 of July 29 on the discipline and intervention of credit institutions is amended as follows:

One. Article 4 (c), (f), (i) and (n) shall be worded as follows:

(c) Credit institutions or the consolidated group or the financial conglomerate to which they belong in insufficient coverage of the minimum own resources requirements, where they are below 80 per of the minimum, where appropriate, established on a compulsory basis according to the risks assumed, remaining in such a situation for a period of at least six months. "

" (f) Carishing of the accounts legally required or carrying them with essential irregularities that prevent the financial and financial situation of the entity or the consolidable group or financial conglomerate from knowing belong. "

" (i) The lack of referral to the competent administrative body of any data or documents should be referred to or required in the exercise of its functions, or its lack of veracity, where the assessment of the the solvency of the institution or of the consolidated group or financial conglomerate to which it belongs. For the purposes of this point, it shall be understood that there is a lack of referral where it does not occur within the time limit granted to the competent body by the competent body in writing the obligation or reiterating the requirement. '

" (n) Present the credit institution, or the consolidable group or financial conglomerate to which it belongs, deficiencies in the administrative and accounting organisation, or internal control procedures, including those relating to risk management, where such deficiencies endanger the solvency or viability of the institution or of the financial conglomerate or group to which it belongs. '

Two. Article 5 (h) and (r) are worded as follows:

" (h) Incurring credit institutions or the consolidated group or financial conglomerate to which they belong in insufficient coverage of the minimum own resources requirements, remaining in such a situation for a period of, at least six months, provided that this does not constitute a very serious infringement in accordance with the provisions of the previous Article. '

" (r) Present the credit institution, or the consolidable group or financial conglomerate to which it belongs, deficiencies in the administrative and accounting organisation, or internal control procedures, including those relating to risk management, after the period granted for its submission by the competent authorities has elapsed, provided that this does not constitute a very serious infringement as provided for in the previous Article. '

Three. Article 16 (1) is worded as follows:

" 1. Where the offences referred to in Articles 4, 5 and 6 relate to the obligations of the consolidable groups of credit institutions, the required entity shall be punished and, if applicable, its administrators and managers.

In addition, where such infringements relate to the obligations of financial conglomerates, the sanctioning measures provided for in this Act shall apply to the obligor when it is a credit institution or a credit institution. mixed financial holding company, provided that in the latter case it is the responsibility of the Banco de España to carry out the task of coordinating the additional supervision of that financial conglomerate. The said sanctioning measures may be extended, if appropriate, to the administrators and managers of the required entity. "

Four. Paragraphs 2 and 4 of Article 43 are worded as follows:

" 2. Prior consultation with the competent supervisory authority of the relevant Member State of the European Union shall be the subject of the authorisation of a credit institution, where any of the following circumstances arise:

(a) That the new entity is to be controlled by a credit institution, an investment firm or an insurance or reinsurance undertaking authorised in that State.

(b) Your control is to be exercised by the dominant entity of a credit institution, an investment firm or an insurance or reinsurance undertaking authorised in that State.

(c) that their control is to be exercised by the same natural or legal persons who control a credit institution, an investment firm or an insurance or reinsurance undertaking authorised in that Member State.

An entity shall be understood to be controlled by another entity when any of the assumptions referred to in Article 4 of the Law 24/1988 of 28 July of the Stock Market.

This consultation will, in particular, achieve the assessment of the suitability of the shareholders and the good repute and experience of the managers and directors of the new entity or the dominant entity, and may be reiterated for the continuous assessment of compliance by the Spanish credit institutions with those requirements. '

" 4. The authorisation for the establishment of a credit institution shall be refused where it has the minimum capital required, a good administrative and accounting organisation or adequate internal control procedures to ensure sound management and prudent of the institution; where its managers and directors, or those of its dominant entity, where it exists, do not have the required commercial and professional good repute, or when it fails to comply with the other requirements which are laid down for exercise banking activity. "

CHAPTER III

Securities market rules

Article 11. Amendment of the Law 24/1988, of July 28, of the Stock Market.

Law 24/1988, of July 28, of the Securities Market, is amended as follows:

One. Article 66 (3) is worded as follows:

" 3. Prior consultation with the competent supervisory authority of the relevant Member State of the European Union shall be the subject of the authorisation of an investment firm when any of the following circumstances arise:

(a) That the new company is to be controlled by an investment firm, credit institution or insurance or reinsurance entity authorised in that State.

(b) Your control shall be exercised by the dominant undertaking of an investment firm, a credit institution or an insurance or reinsurance undertaking authorised in that State.

(c) Your control shall be exercised by the same natural or legal persons who control an investment firm, credit institution or insurance or reinsurance undertaking authorised in that Member State.

An enterprise is understood to be controlled by another company when any of the assumptions referred to in Article 4 of this Act are made.

This consultation will, in particular, achieve the assessment of the suitability of the shareholders and the good repute and experience of the managers and directors of the new entity or the dominant entity, and may be reiterated for the continuous assessment of compliance by Spanish investment services companies with those requirements. "

Two. A new point (d) is added to Article 67 (1) with the following wording:

" (d) The lack of business and professional honorability of members of the board of directors and persons who are in charge of the effective management of the mixed financial holding company, when the company of investment services are to be dependent on that investment as an integral part of a financial conglomerate. "

Three. Point (i) of Article 70 (1) is worded as follows:

" i) That all members of its board of directors and general and assimilated directors have recognized business and professional honorability. In the case of proxies which do not restrict the scope of their representation to specific areas or areas or matters outside the scope of the activity which constitutes the object of the investment services undertakings, the members shall verify, before the end of the granting the power, the concurrency of the business and professional honorability requirement in the proxy and revoking the powers granted when this requirement disappears.

Also, if the investment firm is dependent on a mixed financial holding company that is part of a financial conglomerate, that the persons who take charge of the effective management of the company mixed financial portfolio have recognised good repute and experience. "

Four. Paragraph 4 (c), paragraph 6 (f), paragraph 7 and a new Article 86 (15) shall be worded as follows:

" 4. (c) a company whose principal activity consists in having holdings in financial institutions, a natural person, a group of persons acting systematically in concert, or a non-consolidated entity in accordance with this Law, a number of entities as defined in paragraph 6 of this Article, at least one of them being an investment firm, and provided that the investment firm is the largest relative size of the entities financial, in accordance with the criteria laid down by the Minister for Economic Affairs and Finance. "

" 6. (f) entities whose principal activity is the holding of shares or units, except in the case of mixed financial holding companies subject to supervision at the level of financial conglomerate. "

" 7. For the purposes referred to in paragraph 4, insurance institutions shall not be part of the consolidated groups of investment services undertakings. '

" 15. The consolidable groups of investment firms shall have adequate risk management processes and internal control mechanisms, including sound administrative and accounting procedures, and all entities or undertakings that are They shall have appropriate mechanisms in place to provide information that is necessary for compliance with the standards required of the group. '

Five. The last paragraph of Article 99 shall be deleted. In addition, points (e), (e) and (k) are worded as follows, and a new point (l) (a) is added to Article 99 with the following wording:

(e) Failure to comply with the consolidation obligation laid down in Article 86 of this Law, as well as the lack of the companies referred to in that Article of the accounting and records legally required, essential irregularities which prevent the financial and financial situation of the institution, the consolidable group or the financial conglomerate from being aware of, or do not account for the operations they perform or in which they mediate. '

" and bis) Present the entities subject to the prudential supervision of the National Securities Market Commission, the consolidated groups of investment services companies and the financial conglomerates in which they are integrate, deficiencies in the administrative and accounting organisation or internal control procedures, including those relating to risk management, where such deficiencies endanger the solvency or the viability of the institution or the institution; of the consolidable group or financial conglomerate to which it belongs. "

" k) The reduction of the own resources of investment firms or the consolidated group or financial conglomerate to which they belong, at a level of less than 80% of which is payable, remaining in this situation for at least six consecutive months. '

" l bis) The lack of referral by investment services firms to the National Securities Market Commission of how much data or documents should be referred to or required in the exercise of their functions, or their lack of accuracy, where the assessment of the solvency of the institution or of the consolidated group or financial conglomerate in which it is integrated is made difficult. For the purposes of this letter, it shall be understood that there is a lack of referral where it does not occur within the period granted to the effect by the National Securities Market Commission when recalling in writing the obligation or reiterating the requirement. "

Six. 1. Point (c) (a) and a new point (n) of Article 100 shall be worded as follows:

" c bis) Present the entities subject to the prudential supervision of the National Securities Market Commission, the consolidated groups of investment services companies and the financial conglomerates in which they are Member States shall ensure that, in accordance with Article 1 (1) of Directive (EU) Regulation (EU) Regulation (EU) Regulation (EU) Regulation (EU) Regulation (EU) Regulation (EU) Regulation (EU) Regulation (EU) Regulation (EU) Regulation (EU) competent authorities, provided that this does not constitute a very serious infringement. "

" n) Incur investment services companies or the consolidable group or financial conglomerate to which they belong in insufficient coverage of the minimum own resources requirements, remaining in such a situation period of at least six months, provided that this does not constitute a very serious infringement in accordance with the provisions of the previous Article. '

2. The last paragraph of Article 100 is worded as follows:

"The infringement referred to in point (a) shall be jointly and severally imposed on any of the members of the partnership agreement."

Seven. A new Article 106a is inserted with the following wording:

" Article 106a.

Where the offences referred to in Articles 99, 100 and 101 relate to the obligations of the consolidable groups of investment firms, the obliged entity shall be punished and, if appropriate, its administrators. and managers.

In addition, where such infringements relate to the obligations of financial conglomerates, the sanctioning measures provided for in this Act shall apply to the entity required when it is a service undertaking of investment or a mixed financial holding company, provided that in the latter case it is for the National Securities Market Commission to carry out the function of the coordinator of the additional supervision of that financial conglomerate. The said sanctioning measures may be extended, if appropriate, to the administrators and managers of the required entity. "

CHAPTER IV

Insurance Industry Rules

Article 12. Amendment of the recast of the Law on the Law on the Management and Supervision of Private Insurance, approved by Royal Decree-Law 6/2004 of 29 October.

The Recast Text of the Law on the Management and Supervision of Private Insurance, approved by Royal Decree-Law 6/2004 of 29 October, is amended as follows:

One. The following wording is given in paragraph 2 (e), a new paragraph 4a is inserted and a new point (h) is added to paragraph 6, all of Article 5:

" (e) To indicate the contributions and participations in the social capital or mutual fund of the partners, who shall meet the requirements set out in Article 14, expressly stating which partners have the status of insurance undertaking, credit institution or investment firm, as well as, where appropriate, the shares, regardless of their value, of which any partner in an insurance undertaking, a credit institution or an undertaking is a holder; of investment services. "

" 4 bis. Prior consultation with the competent supervisory authority of the relevant Member State of the European Union shall be the subject of the authorisation of an insurance undertaking when any of the following circumstances arise:

(a) That the new entity is to be controlled by an insurance or reinsurance undertaking, a credit institution or an investment firm authorised in that State.

(b) Your control shall be exercised by the dominant undertaking of an insurance or reinsurance undertaking, a credit institution or an investment firm authorised in that State.

(c) that their control is to be exercised by the same natural or legal persons who control an insurance or reinsurance undertaking, a credit institution or an investment firm authorised in that Member State.

An undertaking shall be deemed to be controlled by another company when any of the assumptions referred to in Article 4 of Law 24/1988 of 28 July of the Securities Market are concerned.

This consultation will, in particular, achieve the assessment of the suitability of the partners and the good repute and experience of the managers and managers of the new entity or the dominant entity, and may be reiterated for the continuous assessment of compliance by the Spanish insurance entities with those requirements. "

" 6. The application for authorisation shall be refused when:

(h) There are contributions or shares referred to in Article 5.2.e), such a situation would impede the proper exercise of management and supervision or fail to ensure the sound and prudent management of the institution, or the managers and directors of the financial institution which is its dominant entity, where it exists, do not have the required good repute or experience. '

Two. Article 15 (1) is worded as follows:

" 1. Those who, under any title, carry the effective management of the insurance undertaking, or of an institution whose principal activity consists of taking shares in insurance undertakings, shall be natural persons of recognised good repute and with the necessary conditions of professional qualification or experience and shall be entered in the Administrative Register of senior officials of the insurance institutions referred to in Article 74.

In any event, it is understood that they are in the effective direction of management or management positions, as referred to in point (a) of Article 40.1. Legal persons may be charged with administration, but in this case they shall designate a natural person who meets the above requirements in their representation. "

Three. The first subparagraph of paragraph 2, the first subparagraph of paragraph 3 (a) and (c) of paragraph 3, and a new paragraph 3a, all of Article 20, shall be worded as follows:

" 2. In order to comply with the solvency margin and, where applicable, the other limitations and obligations provided for in the law, the insurance institutions shall consolidate their accounting statements with the other insurance institutions or financial institutions which they constitute a unit of decision or in which they have a participation in the sense referred to in Article 185 of the Law on Limited Companies. '

" 3. The consolidated groups of insurance institutions are subject to the duty of consolidation in accordance with the provisions of this Article, the rules to be laid down in their development and, in the alternative, the rules contained in Articles 42 to 49 of the Treaty. Trade code and other applicable trade legislation. In addition, they will have adequate risk management processes and internal control mechanisms, including sound administrative and accounting procedures, and all entities and companies that integrate them should have appropriate mechanisms for have the information that is necessary for compliance with the standards required for the group.

The following rules apply:

(a) A group of financial institutions is considered to be a consolidable group of insurance institutions, with the types of entities integrated in that group being regulated, when any of the following circumstances:

1. An insurance entity controls the other entities.

2. The parent entity is an entity whose principal activity is to have holdings in insurance entities.

3. A company whose principal activity consists of having holdings in financial institutions, a natural person, a group of persons acting systematically in concert or a non-consolidated entity according to this law controls several financial institutions, at least one of them being an insurance undertaking, and provided that the insurance institutions are the largest relative size of the financial institutions, in accordance with the criteria that The Minister of Economy and Finance will have the effect.

When any of the last two circumstances apply, it shall be for the Directorate-General for Insurance and Pension Funds to designate the person or entity required to formulate and approve the annual accounts and the management report. and to proceed to its deposit, corresponding to the obligation of the appointment of the auditors. For the purposes of the specified designation, the insurance institutions belonging to the group shall report their existence to the Directorate-General for Insurance and Pension Funds, with an indication of the domicile and the social ratio of the institution which is the control, or its name, if it is a natural person. "

" (c) The Directorate-General for Insurance and Pension Funds may request information from natural persons and inspect non-financial institutions with which there is a control relationship in the sense established in the paragraph 2 of this Article, for the purposes of determining its impact on the legal, financial and economic situation of insurance institutions and their consolidated groups. In particular, and in the case of the dominant entity of an insurance or reinsurance undertaking, the Directorate-General for Insurance and Pension Funds shall carry out a general supervision of the transactions between the insurance institutions or their insurance institutions. consolidated group and the dominant non-financial institution and its subsidiaries. '

" 3 bis. For the purposes of paragraph 2, credit institutions and investment firms shall not be part of the consolidated group of insurance institutions. '

Four. The first subparagraph of paragraph 1 and points (c), (e), (l) and (q) of Article 40 (3) shall be worded as follows:

" 1. The following persons and entities which infringe rules on the management and supervision of private insurance shall be liable to be punishable under the provisions of the following Articles:

(a) Insurance entities, including the dominant groups of consolidated groups of insurance entities.

(b) Entities that, where appropriate, have to formulate and approve the consolidated accounts and reports of such groups.

(c) Forced entities in financial conglomerates in the case of an insurance undertaking or a mixed financial holding company, provided that in the latter case it corresponds to the Directorate-General for Insurance and Funds Pensions shall be the responsibility of the coordinator of the supplementary supervision of that financial conglomerate.

(d) Natural persons or entities that are holders of significant holdings or perform management or management positions in any of the above entities.

e) The liquidators of insurance entities. "

" 3. (c) the defect, in the insurance institutions or in the consolidated groups or financial conglomerates to which they belong, in the solvency margin in excess of five per cent of the corresponding amount and any insufficiency in the guarantee fund. "

" 3. (e) Carishing of the accounts required by law or carrying it with substantial anomalies which prevent or make it difficult to know the economic, financial and financial situation of the entity or the consolidable group or financial conglomerate; (a)

is a member of the European Union and the Member States of the European Union;

" 3. (l) The lack of referral to the Directorate-General for Insurance and Pension Funds of how much data or documents the insurance institution has to supply to it, by means of its periodic submission, already by the attention of individual requirements that directs the said Directorate-General in the exercise of its functions, or its lack of veracity, when this makes it difficult to assess the solvency of the insurance undertaking, or of the consolidated group or financial conglomerate to which it belongs. For the purposes of this letter, it shall be understood that there is a lack of referral where the referral does not take place within the time limit granted for the purpose by the Directorate-General for Insurance and Pension Funds when recalling in writing the obligation of regular or reiterate the individualized requirement. "

" 3. (q) to present the insurance institution, the consolidated group of insurance institutions or the financial conglomerate in which deficiencies are incorporated in the administrative and accounting organisation, or in the internal control procedures, including relating to the management of the risks, where such deficiencies endanger the solvency or viability of the insurance undertaking or of the consolidating group or financial conglomerate to which it belongs. '

Five. Points (c) and (q) and a new point (r) of Article 40 (4) are worded as follows:

"(c) The defect, in the insurance institutions or in the consolidated groups or financial conglomerates to which they belong, in the solvency margin of less than five per cent of the corresponding amount."

" q) Present the insurance institution, the consolidated group of insurance institutions or the financial conglomerate in which deficiencies are integrated in the administrative and accounting organisation, or in the control procedures internal, including those relating to the management of the risks, after the period granted for the purpose of the remedy has elapsed by the competent authorities, and provided that this does not constitute a very serious infringement as provided for in the Previous paragraph 3. "

"r) Failure to comply with existing rules on concentration and risk limits."

Six. Article 71 (3) is worded as follows:

" 3. The Ministry of Economic Affairs and Finance shall require that the insurance institutions subject to their supervision have a good administrative and accounting organisation and appropriate internal control and risk management procedures. In addition, its advertising will be in accordance with the provisions of Law 34/1988 of 11 November 1988, General of Advertising, and detailed rules for its adaptation to the insurance companies set out in the This Law. "

Additional disposition first. Regulatory references.

Mentions that the Recast Text of the Law on the Management and Supervision of Private Insurance, approved by Royal Decree-Law 6/2004, of October 29, carries out securities companies and securities agencies. They will understand investment services companies.

Additional provision second. Amendment of Law 31/1985 of 2 August of Regulation of Basic Standards on Governing Bodies of Savings Banks.

The additional provision of Law 31/1985, of 2 August, of Regulation of the Basic Rules on Governing Bodies of Savings Banks is amended, which will be worded as follows:

" Second. In the case of Savings Banks whose Statutes on the entry into force of this Law collect as a founding entity the Catholic Church or entities governed by public law, the procedure for the appointment and the duration of the mandate of the representatives of the founding entity in the governing bodies shall be governed by what is available in its Statutes, and shall be subject to the provisions of this Law and its implementing rules. "

Transitional disposition. Adaptation of the Statutes and Regulations of the Savings Banks referred to in the second provision of Law 31/1985 of 2 August of Regulation of Basic Standards on Governing Bodies of Savings Banks.

Savings Banks referred to in the second provision of Law 31/1985 of 2 August, of Regulation of Basic Standards on Governing Bodies of Savings Banks will adapt their Statutes and Regulations, thus as the composition of its governing bodies to the legal regime resulting from that provision, in the wording given by this Law, in accordance with the provisions laid down in the rules applicable to them or, failing that, in the six months from the entry into force of this Law.

Repeal provision. Regulatory repeal.

Chapters IV and V of Law 13/1992, of 1 June, of own resources and supervision on a consolidated basis of financial institutions are repealed.

Final disposition first. Competitive titles.

This law, which will have a basic character, is dictated by the jurisdiction of the jurisdiction of the

.

Final disposition second. Enabling regulatory development.

Without prejudice to the specific ratings to other bodies provided for in this Law, the Government is empowered to regulate the provisions of the law.

Final disposition third. Entry into force.

This Law shall enter into force on the day following that of its publication in the "Official Gazette of the State" and shall first apply to the supervision of the accounts for the financial year 2005.

Therefore,

I command all Spaniards, individuals and authorities, to keep and keep this law.

Madrid, 22 April 2005.

JOHN CARLOS R.

The President of the Government,

JOSE LUIS RODRIGUEZ ZAPATERO