Law 5/2005, Of 22 April, Supervision Of Financial Conglomerates And Amending Other Laws In The Financial Sector.

Original Language Title: Ley 5/2005, de 22 de abril, de supervisión de los conglomerados financieros y por la que se modifican otras leyes del sector financiero.

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JUAN CARLOS I King of Spain to all that the present join together and act.

Know: That the Cortes Generales have approved and I come in to sanction the following law.

EXHIBITION grounds, financial stability is one of the central pillars of the design of the single European financial market. To this aim, based on the exercise of a secure prudential supervision, has already contributed convergence promoted by the European institutions, both in regards to basic standards as a practical tools of implementation. It is a tangible reality, in which participated decisively the financial services Action Plan, launched by the European Commission.

Precisely, within the framework of this plan, was answered the need to offer an appropriate response to the proliferation of cross-sectoral groups which include credit institutions, investment services and insurance companies. This intensification of linkages between the three traditional financial sectors presented a double problem. First of all, it resulted in the emergence of new risks, or could at least increase the existing. It was necessary, therefore, to adopt adequate and proportional regulation such risks. Secondly, this new regulation should undertake in a harmonised manner, as you can expect in the framework of a single financial space, which, moreover, correct inconsistencies between sectoral legislation.

The starting point was very poor. While the 'homogeneous' groups of financial institutions were sufficiently covered by sectoral rules of prudential supervision in full and satisfactory operation, «heterogeneous» groups lacked a normative full body, revealing in addition numerous inconsistencies between sectoral laws (when no gaps) applicable to entities of such groups.

In Spain, on the other hand, the situation was much more satisfactory. Since 1992 been operating in our legal system a system of joint prudential supervision of the activities of the groups carrying out the three types of financial business: banking, securities and insurance. These groups have received the designation of non-consolidated mixed groups. The explanatory statement of the law 13/1992 of June 1, own resources and supervision on a consolidated basis of the financial institutions, described this decision in the following way: «has seemed... appropriate to incorporate a final chapter that allows especially monitor the effective level of own resources and concentration of risks of those mixed groups within which there are financial institutions or groups that , in accordance with the specific regulations, not need to consolidate among themselves their financial statements. It is devoted, therefore, in this chapter, a sort of consolidation of limited scope which, pursuing objectives similar to the traditional technique of monitoring on a fully consolidated basis, defeat the severe difficulties of applying the latter to entities such as insurers and other financial institutions, whose activity and risks are so dissimilar". The law already has, therefore, a set of special surveillance rules applicable to non-consolidated mixed groups. This set is structured, from one side, around a series of additional solvency requirements to those laid down in the sectoral framework (individual or consolidated) for banks, securities and insurance, and another, about the appointment of a supervisory authority responsible for monitoring compliance and for the creation of a procedure of cooperation to adopt , where appropriate, the necessary measures to ensure such compliance.

Meanwhile, at Community level advances were much more modest, without any harmonisation standard. Doctrinally, the land was paid for the work of the Forum set's G-10 on financial conglomerates and the report of the Committee economic financial of the Union European financial stability (report Brouwer). The Commission was able to synthesize the previous contributions and developed a series of works which finally 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 companies and utilities investment in a financial conglomerate, and that the directives amending 73/239/EEC 79/267/EEC, 92/49/EEC, 92/96/EEC, 93/6/EEC and 93/22/EEC of the Council and directives 98/78/EC and 2000/12/EC of the European Parliament and of the Council. The present law comes to incorporate partially said directive into the Spanish legal system.

The law responds, therefore to the fundamental objective of establishing a specific prudential regime applicable to financial conglomerates. There is, however, a secondary goal: move towards a greater coherence between the various legislations applicable 'homogeneous' groups, and between them and their own financial conglomerates, sectoral. This sectoral regulation, to which the text of the law makes continual references, would be contained, for credit institutions, the law 13/1985, of 25 may, coefficients of investment, resources and reporting of financial intermediaries, and 26/1988, of July 29, on discipline and intervention of credit institutions; for the stock market, in law 24/1988, of 28 July, the stock market, and for the insurance sector, under the revised text of the law of management and supervision of private insurance, approved by Royal Legislative Decree 6/2004, of 29 October. The revised text of the regulation plans and pension funds Act, approved by Royal Legislative Decree 1/2002, of 29 November, and the law 35/2003, 4 November, collective investment institutions should add to them.

Chapter I is devoted to the first of the outstanding objectives: the design of a new system of supervision which are held in credit institutions, investment services and insurance companies and reinsurers, companies as well as the management of collective investment companies and the management entities of pension funds (to which both the directive and the law are referred to generically as 'regulated entities') integrated in a financial conglomerate. Thus, first provides a definition of financial conglomerate, from the classic definition of Group offered by article 4 of law 24/1988, of July 28, the stock market. The following are core elements of such supervision: solvency, capital adequacy, concentration of risk, intra-group transactions and procedures for risk management and internal control mechanisms.

Articles 5, 6 and 7 provide a set of measures to facilitate the exercise of supplementary supervision. It's creating the figure of the Coordinator, as competent authority, who shall be responsible for the coordination of the activity supervisor, in a framework that might attend a multitude of authorities, if the financial conglomerate presents a high degree of diversification sectoral and territorial. The system is completed with obligations of cooperation and consultation between all the competent authorities involved in the supervision of a same financial conglomerate.

Article 8, for its part, deals with the problem of financial conglomerates from third States, whose regulated entities operating in Spain. The principle of reciprocity is the axis that explains the regime applicable to this type of entities.

Chapters II, III and IV respond to the second of the goals set by the directive, and are dedicated to institutions of credit, the stock market and the insurance sector, respectively.

Chapter I article 1 financial conglomerates. Object.

Regulated entities in the financial conglomerates subject to supplementary supervision regime provided for in this law and its development provisions, which apply to other entities in the terms indicated.

Article 2. Definitions.

1 it shall be deemed that a group is a financial conglomerate when the following circumstances occur concurrently simultaneously: to) that the parent group is an entity regulated or, otherwise, that the Group's activities mainly occur in the financial sector, in accordance with paragraph 4 of this article, and at least one of the subsidiaries is a regulated entity , pursuant to paragraph 3 of this article.

(b) that at least one of the entities of the Group belong to the insurance sector and at least another belong to the banking or investment services.

(c) that both consolidated or aggregated Group entities included in the insurance sector as of the entities of the group included in the sectors banking and investment services are significant, in accordance with paragraph 5 of this article.

Financial conglomerate also will be considered any subgroup of a group satisfying the conditions laid down in previous letters.

2 a the effects of this law, means that entities to each other belong to the same group: to) constitute a decision unit, in the terms provided for in article 4 of law 24/1988, of 28 July, the securities market,
(b) keep a stake. Participation shall mean all right over the capital of other companies, creating a durable link with these, is intended to contribute to the activity of the company, and, in any case, the holding, directly or indirectly, of at least 20 percent of the capital or of the voting rights.

All entities that maintain among themselves the designated links in previous letters, what ever their nationality, domicile or legal, and nature irrespective of the country where to develop their activities will be integrated in the group.

3. for the purposes of the provisions of this law, they will be entities regulated credit institutions, investment service companies, the management companies of collective investment institutions, the management entities of pension funds and insurance and reinsurance entities.

Regulated entities shall include: a) the Spanish entered in the special registers held by the Bank of Spain, the National Commission of the stock market and the General Directorate of insurance and pension funds.

b) authorized in other Member States of the European Union.

(c) agencies or companies, both public and private, that have been authorised in third countries when developing activities reserved for institutions of credit, investment services, insurance and reinsurance companies, management companies of collective investment and management of pension funds entities institutions.

4 means that the activities of a group are developed mainly in the financial sector where the ratio between the balance sheet total of the financial sector entities, regulated or not, the Group and the balance sheet total of the group as a whole exceeds 40 per cent.

5 means that the activities in a financial sector are significant if it turns out to be the average of the ratio between the balance sheet total of that sector and the balance sheet total of the entities of the financial of the Group and the ratio of this sector solvency requirements and total requirements of soundness of institutions in the financial sector in the group exceeds 10 per cent.

Requirement provided for in point (c)) of paragraph 1 shall be considered equally satisfied if the balance sheet total of the financial sector of smaller dimension of the group is greater than 6,000 million euros. Be determined according to the rules, the assumptions that exceed the threshold laid down in this paragraph, and not achieving is referred to in the preceding paragraph, the Group may not be considered financial conglomerate, or not be applied the provisions contained in the letters c), d) and e) of paragraph 1 of article 4.

For the purposes of this Act, the financial sector of small dimension of a group will be the sector with the lowest average and the most important financial sector is the sector with the highest average. To calculate smaller and the most important financial sector, banking and investment services sector shall be considered together.

6 in the cases and in accordance with the requirements to be determined by regulation, the balance sheet total may be replaced or supplemented in the ratios referred to in paragraphs 4 and 5 by both or one of the following parameters: to) the income structure.

b) activities out of balance.

In order to avoid sudden changes in the regime of financial conglomerates already subject to supplementary supervision, in the case that these ratios were below 40 percent and 10 percent, respectively, during the three years following shall apply to the financial conglomerate the ratios of 35 per cent and 8 per cent. Also, if the balance sheet total of the financial sector's smaller fall below the 6,000 million euros, applies a threshold of EUR 5,000 million.

During the period referred to in the preceding paragraph, the Coordinator, with the agreement of the other relevant competent authorities, may decide to stop applying the lower ratios or the lower quantities there referred to.

7 will be mixed financial holding company considered the dominant undertaking which is not a regulated entity and that, together with its subsidiaries, of which at least one will be a regulated entity and other entities, constitutes a financial conglomerate.

8. for the purposes of the provisions of articles 5 and following, will be competent authorities within a financial conglomerate the national authorities of the Member States of the European Union empowered by law or regulation to supervise the regulated entities residing in their respective territories, both individually and on a consolidated basis.

Article 3. Scope of application.

1 the financial conglomerates that are subject to this law: to) the parent is a Spanish regulated entity.

(b) the dominant entity is a mixed financial holding company with domicile in Spain and at least one of the subsidiaries is a Spanish regulated entity.

(c) the parent being a mixed financial foreign holding company, all dependent entities are Spanish regulated entities either Spanish is the dependent regulated entity with the largest balance sheet total in the most important financial sector.

(d) in other cases, the regulated entity with the largest balance sheet total in the most important financial sector is Spanish.

2 shall be equally subject to the provisions of this law and its implementing regulations: to) Spanish regulated entities that are part of a financial conglomerate that is subject to additional supervision by competent authorities of other Member States of the European Union.

((b) financial mixed holding companies with registered office in Spain that are parent of financial conglomerates indicated in the letter to) above.

(c) the regulated entities whose parent is a regulated entity or a mixed financial holding company, having its head office outside the European Union, in the terms established in article 8 of this law.

(d) regulated entities in groups that are not financial conglomerates, on the terms laid down in paragraph 3 of article 4 of this law.

Article 4. Elements of the supplementary supervision.

1 without prejudice to prudential requirements that are them enforceable individually or in base consolidated in accordance with sectoral rules, the regulated entities in the financial conglomerate shall: to) maintain at all times, at the level of the financial conglomerate, one sufficient volume of resources or solvency margin in relation to investments and the risks involved; According to the rules, will be established inclusion criteria of financial entities in the financial conglomerate for the purpose of calculating the capital adequacy requirements, as well as the methods pursuant to which must be made that calculation, which must be from the sum of the solvency requirements laid down in the sectoral rules applicable to entities of the financial conglomerate.

(b) policies of capital adequacy in financial conglomerate.

(c) respect the quantitative limits and other requirements that may fix the Government or, with your specific authorization, the Minister of economy and finance, the Bank of Spain and the National Commission of the market of values, each in its specific field, in relation to the concentration of risks of the entities in the financial conglomerate, as well as inform the Coordinator of any concentration of risk in the financial conglomerate.

(d) respect the quantitative limits and the requirements qualitative that they can fix the Government or, with your specific authorization, the Minister of economy and finance, the Bank of Spain and the National Commission of the market of stock, each in its specific field, with regard to intra-group transactions of entities of another financial conglomerate and with the physical or legal persons with which they have close ties as well as report to the Coordinator on significant intra-group transactions of entities regulated in the financial conglomerate.

Means that there are close ties when two or more natural or legal persons are linked by a controlling relationship, in the terms provided for in article 4 of law 24/1988, of July 28, the stock market, or holding, directly or indirectly, or through a controlling relationship, the 20 per cent or more of the capital or of the voting rights of an entity.

(e) count on the level of the financial conglomerate adequate internal control mechanisms and risk management procedures, as well as a good administrative and accounting organization.

2 when the dominant entity in the financial conglomerate is a mixed financial holding company, the sectoral rules regarding the concentration of risks and the most important financial sector in the financial conglomerate intra-group transactions, if any, shall apply to the whole of this sector including the mixed financial holding company.

3. by law, may extend some or all of the obligations under paragraph 1 to those groups that meet all the requirements referred to in articles 2 and 3, except for that laid down in point (c)) of paragraph 1 of article 2.

The groups which are subject to the aforementioned shall them equally apply articles 5, 6 and 7 of this Act, with the specifications to be determined by regulation.
4. by law, the assumptions on which the supervisory authorities may require the fulfillment of some or all of the obligations laid down in paragraph 1, for regulated entities in which one or more persons, physical or legal, hold participations or capital ties, or exercise a significant influence, to form a group, under the terms established by article 2 shall be determined and must be taken into account for this purpose, the peculiarities of cooperative and mutualist groups.

5. those who play charges of administration and management in mixed financial holding companies shall be persons of recognized honorability commercial and professional, and must have, at least most, knowledge and experience appropriate to exercise its functions.

Failure to meet the above requirements will determine the lack of suitability of the society to hold a significant stake in any regulated entity, and will be what to do so provided the sectoral rules applicable to each of the regulated entities that are integrated into a financial conglomerate.

Article 5. Coordinator and obliged entity.

1. the exercise and the coordination of the supplementary supervision of the regulated entities in the financial conglomerates subject to this law shall correspond to a single Coordinator, who will be one of the authorities who have assigned functions of monitoring and supervision over regulated entities that integrate them, in accordance with provisions of the following paragraph.

2 when the dominant entity within a financial conglomerate is a regulated entity, the task of coordinator shall be exercised by the competent authority that has assigned the functions of monitoring and supervision of consolidatable group in which it is integrated, or, in absence thereof, of the entity considered individually.

In the financial conglomerate whose parent is not a regulated entity, the task of coordinator shall be exercised by the competent authority concerned in accordance with the criteria established by regulation.

3 the functions of Coordinator with regard to supplementary supervision of the regulated entities in a financial conglomerate are the following: to) coordination of the gathering and dissemination of relevant or essential information including the dissemination of information that would be relevant to the work of supervision by a competent authority in accordance with the sectoral rules.

(b) supervisory overview and assessment of the financial situation of a financial conglomerate.

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

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

(e) planning and coordination of activities of supervision when necessary for the objectives of the supplementary supervision and, in any case, in serious situations.

(f) other functions attributed to him by this law and its development provisions.

4. the presence of a coordinator that matches the performance of the duties which he credited this law shall not affect the functions, powers and responsibilities conferred on the exercise of the tasks of supervision and control authorities the respective sectoral rules.

5. in each financial conglomerate, there will be a Spanish obligated entity that will assume the duties arising from the relations of the conglomerate with the Coordinator.

Obliged entity will be parent, if this is a credit institution, provider of investment, insurance company or mixed financial holding company. Failing that, it will be the lender, provider of investment or insurance entity in the financial conglomerate, the Coordinator identifies after consultation with the other competent authorities and hear the financial conglomerate.

Article 6. Cooperation between competent authorities.

1. the competent Spanish authorities shall cooperate among themselves and with other competent authorities in the framework of the supplementary supervision of the regulated entities in the financial conglomerates subject to this law and the rest of national laws in application of Directive 2002/87/EC of the European Parliament and of the Council of 16 December 2002.

2. whenever appropriate to play the role of coordinator or be responsible for the supervision on a consolidated basis from a group of financial institutions in any of the financial conglomerate referred to in the preceding paragraph, the competent Spanish authorities shall establish coordination arrangements with other authorities of the same financial conglomerate, and may restrict them to those that are considered to be relevant , according to criteria to be determined by regulation.

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

They should also celebrate referral agreements when, being competent authorities are required to do so by the authorities of other Member States of the European Union which perform the functions described in the first subparagraph of this paragraph.

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

This information exchange scheme can be extended to central banks, the European system of central banks and the European Central Bank.

4 the competent Spanish authorities shall consult with the other authorities of the same financial conglomerate, with previous character, the adoption of the following measures when they may be relevant for the exercise of supplementary supervision work: to) changes in the shareholder, organisational structure and management of the regulated entities in the financial conglomerate, which require the approval or authorisation of competent authorities.

(b) exceptional measures or significant sanctions.

(c) any other that may be established by regulation.

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

5. the competent authority, Spanish or of another Member State, that the role of coordinator within a financial conglomerate may contact directly institutions, regulated or not, the conglomerate, to gather any information that is relevant for the purposes of supplementary supervision. When a requested information had already been provided to a competent authority pursuant to the applicable sectoral legislation, the authority that performs the function of coordinator may request such information from that.

Without limiting the foregoing, the competent Spanish authorities, at the request of the competent authority that the role of Coordinator, must request to entities domiciled in Spain, regulated or not, the financial conglomerates, any information that may be relevant for the exercise of its coordination work, and send you such information.

Equally, the Spanish authorities which play the role of coordinator of a conglomerate may apply to the competent authorities of other Member States of the European Union any information which is relevant for the purposes of supplementary supervision in relation to the dominant entity, or entities, regulated or not, chipboard, domiciled in the Member State concerned.

6. the Minister of economy and finance may issue rules needed to ensure proper coordination and collaboration, in the terms established in this article, between the competent Spanish authorities.

Article 7. Implementing measures.

1 when not met the obligations set out in article 4 and its implementing rules, when they met but the solvency at the level of the financial conglomerate may be jeopardised or where the intra-group transactions or the risk concentrations are a threat to the financial situation of one, they shall apply to entities regulated the same limitations laid down in the regulation of the consolidated groups of financial institutions.

2. the competent Spanish authorities will have with respect to the regulated entities in a financial conglomerate and the Coordinator in the case of mixed financial holding companies, equal powers as those established in the regulation of the consolidated groups of financial institutions.

3. it arranged in paragraphs above shall in any case without prejudice, where appropriate, of the sanctions provided for in the law 24/1988, of July 28, the stock market, Law 26/1988, of July 29, on discipline and intervention of credit institutions, the consolidated text of the Act of ordination and supervision of private insurance approved by Royal Legislative Decree 6/2004, of 29 October, the text revised of the law of regulation plans and pension funds, approved by Royal Legislative Decree 1/2002, of 29 November, and the law 35/2003, 4 November, collective investment institutions.
Regulated entities of the groups referred to in paragraph 3 of article 4 may be punished, in accordance with the provisions of the standards referred to in the preceding paragraph, for breach of the obligations that are submitted pursuant to this law. For this purpose, the references contained in the aforementioned regulations to financial conglomerates shall be made to concerned groups.

Article 8. Groups of third countries.

1. the competent Spanish authorities shall check whether regulated entities whose parent is a regulated entity or a mixed financial holding company which is domiciled outside the European Union are subject to supervision by an authority of a third country, which is equivalent to that set out in this chapter and its implementing regulations those that are part of a group that, apply the rules contained in article 2, always constitute a financial conglomerate.

The duty of verification referred to in the preceding paragraph only proceed when, in accordance with the criteria set out in paragraph 2 of article 5 and its development provisions, corresponds to the competent Spanish authority the coordinator function.

2. in the case that not appreciated the existence of a regime of equivalent supervision, it will apply to regulated entities referred to in the preceding paragraph the supervisory regime laid down in this law and its development provisions.

However the provisions of the preceding paragraph, the Government and, with your specific authorization, the Minister of economy and finance, the Bank of Spain and the National Commission of the market of values, in the scope of their powers, may provide other methods for additional monitoring of the groups referred to in this paragraph, for which exercise the function of Coordinator. Among these methods shall include the powers of supervisory authorities require the Constitution of a financial joint holding company which has its head office in the European Union.

Methods shall comply with the objectives of the supplementary supervision defined in this law and be communicated to the other competent authorities and the European Commission.

Chapter II rules relating to credit item 9. Modification of the law 13/1985, of 25 may, coefficients of investment, resources and obligations of information of financial intermediaries.

Law 13/1985, of 25 may, coefficients of investment, resources and obligations of information of financial intermediaries, is modified in the following terms: one. (Paragraph 1, letter c) of paragraph 3, the letter g) of paragraph 4 and paragraph 5 of article 8, are written in the following way: «1. for compliance with the capital adequacy ratio and, where appropriate, of the limitations provided for in articles 6 and 10, credit institutions will consolidate their financial statements with the of other credit institutions and financial institutions which constitute them a unit of decision. " For the same purposes, credit institutions that do not have subsidiaries must develop some financial statements that apply criteria similar to the consolidation if you have holdings in the direction indicated in paragraph 1 of article 185 of the law of corporations, or, directly or indirectly, at least 20 per cent of the capital or of the voting rights in another financial institution.

The consolidated groups of credit institutions shall have adequate internal control mechanisms and risk management processes including administrative procedures and accounting solids, and all entities or companies that integrate them must have appropriate mechanisms to provide the information that is necessary for the required compliance to the group."

«(3 c) that a company whose main activity consists of having holdings in financial institutions, an individual, a group of persons acting in concert, systematically or not consolidatable entity pursuant to this law, to handle various financial entities, at least one of them being a credit institution, and always that credit institutions are those of greatest relative dimension between financial institutions «, in accordance with the criteria provided by the Minister of economy and finance to the effect.»

«(4. g) the entities whose main activity is the holding of shares, except that in the case of mixed financial holding companies subject to supervision at financial conglomerate level. ' «» 5. for the purposes referred to in paragraph 1 of this article, the insurance companies will not form part of the consolidated groups of credit institutions.»

Two. The first subparagraph of paragraph 2 and paragraph 3 of article 9 are written in the following way: «2. the Bank of Spain, as well as the autonomous communities in the areas of competence, may require institutions subject to consolidation of a group consolidatable of credit how much information is needed to verify performed consolidations, analyze the risks assumed by the consolidated entity set and evaluate the risk management processes and mechanisms» internal control of the Group entities; also may, with the same aim, inspect books, documents and records.»

«3. the Bank of Spain, as well as the autonomous communities in the scope of their powers, can request information of individuals and inspect non-financial entities with which there is a relationship of control within the meaning established by paragraph 2 of the preceding article, for the purpose of determining its impact on the legal, economic and financial situation of the credit institutions and of its consolidated Group. «In particular, and in the case of the parent of a credit institution, the Bank of Spain should be a general supervision of transactions between the credit institution or its consolidatable group and key non-financial entity and its subsidiaries.»

3. Add a new paragraph 3 to article 13 with the following wording: «3. the Bank of Spain should check if credit institutions whose parent is a bank domiciled outside the European Union are subject to supervision on the basis established by a competent authority of a third country, which is equivalent to that provided in this law and its implementing regulations.»

Where not appreciated the existence of a regime of equivalent supervision, will apply to credit institutions mentioned in the preceding paragraph the regime of supervision on a consolidated basis provided in this law and its development provisions.

Notwithstanding the provisions of the preceding paragraph, the Bank of Spain may establish other methods of supervision on a consolidated basis of the groups referred to in this section. Among these methods, will have the authority to the Bank of Spain to demand the Constitution of a dominant financial institution which has its head office in the European Union.

Methods must be the objectives of supervision on a consolidated basis defined in this law and be communicated to the other competent authorities involved and the Commission.'

Article 10. Modification of law 26/1988, of July 29, on discipline and intervention of credit institutions.

Law 26/1988, of July 29, on discipline and intervention of credit institutions, is modified in the following terms: one. C letters), f), i) and n) article 4 are worded in the following way: «c) incurred by credit institutions or the consolidated group or financial conglomerate that belong in inadequate coverage of minimum equity requirements, when these are located below 80 per cent of the minimum, if any, established mandatory depending on the risks involved» remaining in such a situation for a period of at least six months.

«»(f) lacking the accounting legally required or take it to essential irregularities that prevent knowing the asset and financial situation of the entity or of the financial conglomerate or consolidatable group to which they belong. «» (i) the lack of referral to the competent administrative organ of all information or documents must refer you or required in the exercise of its functions, or its lack of veracity, when this is difficult the assessment of the solvency of the institution or the financial conglomerate or consolidatable group to which it belongs. For the purposes of this letter, means that there is a lack of remission when this does not occur within the period granted to the effect by the competent authority to recall the obligation in writing or reiterate the requirement.»

«(n) present the credit institution, or the financial conglomerate or consolidatable group to which it belongs, in the administrative and accounting organization, or deficiencies in internal control procedures, including those relating to the management of risks, when such deficiencies endanger the solvency or viability of the institution or of the financial conglomerate or consolidatable group to which belongs.»

Two. Letters h) and r) article 5 are worded in the following way: «h) incurred by credit institutions or financial consolidatable or conglomerate group to which they belong in inadequate coverage of minimum equity requirements, remaining in such a situation for a period of at least six months, provided that this does not constitute serious infringement in accordance with the provisions of the preceding article. "
"r) present the credit institution, or the financial conglomerate or consolidatable group to which it belongs, deficiencies in administrative and accounting or internal control procedures, including those relating to risk management, once elapsed the deadline granted to its correction by the competent authorities, and that this does not constitute infringement very always grave in accordance with the provisions of the preceding article."

3. Paragraph 1 of article 16 is worded in the following way: «1. when violations typified in articles 4, 5 and 6 relate to obligations of the consolidated groups of credit institutions, it shall be punished the obliged entity and, if necessary, to its directors and management. "

Also when such offences relate to the obligations of financial conglomerates, the punitive measures provided for in this law shall apply to the obliged entity when this is a credit institution or a mixed financial portfolio, provided that in the latter case corresponds to the Bank of Spain play the role of coordinator of the supplementary supervision of the financial conglomerate. The measures concerned infringement may extend, if necessary, to the directors and management of the obliged entity.»

Four. Paragraphs 2 and 4 of article 43 are written in the following way: that the new entity will be controlled by a credit institution» a provider of investment or an insurance or reinsurance entity authorised in that State.

(b) that your control will be exercised by the parent of a credit institution, an investment services company or an insurance or reinsurance entity authorised in that State.

(c) that your control will be exercised by the same natural or legal persons controlling a credit institution, an investment services company or an insurance or reinsurance entity authorised in that Member State.

Means that an entity is controlled by another when any of the cases listed in article 4 of law 24/1988, of July 28, the stock market.

That query will achieve, in particular, the assessment of the suitability of the shareholders and the reputation and experience of the directors and management of the new entity or parent, and can be reiterated for the continuous assessment of compliance by the Spanish credit institutions, of these requirements.»

«4. the authorization for the creation of a credit institution shall be refused when it lacks the required minimum capital, administrative and accounting organisation or appropriate internal control procedures that ensure the sound and prudent management of the institution; when its administrators and managers, or those of its parent, where it exists, do not have the commercial and professional honesty required, or when it fails to comply with the other requirements regulations established to exercise banking activity.

Chapter III rules relating to article 11 stock market. Modification of the law 24/1988, of 28 July, the stock market.

Modifies Law 24/1988, of 28 July, the stock market, in the following terms: one. Paragraph 3 of article 66 is drawn up in the following terms: that the new company will be controlled by a firm of investment services» a credit institution or an insurance or reinsurance entity authorised in that State.

(b) that your control will be exercised by the dominant company of a company's investment services, an entity of credit or insurance or reinsurance entity authorised in that State.

(c) that your control will be exercised by the same natural or legal persons that control a company of services of investment, a credit institution or an insurance company or reinsurer, authorised in that Member State.

Means that a company is controlled by another, when one of the cases referred to in article 4 of this law.

That query will achieve, in particular, to the evaluation of the suitability of the shareholders and the reputation and experience of the directors and management of the new entity and the parent, and you can repeat for continuous assessment of compliance by the investment services companies Spanish, these requirements."

Two. Added a new letter d) in paragraph 1 of article 67 with the following wording: «d) the lack of business and professional reputation of the members of the Board of Directors and of the people who take care of the effective direction of the mixed financial holding company, when the investment company will be dependent on that as part of a financial conglomerate. "

3. The letter i) in paragraph 1 of article 70 is couched in the following terms: «i) that all members of its Board of Directors and Directors General and similar have a recognized honorability enterprise and professional.» With respect to parents that do not restrict the scope of its representation to areas or specific or matters unrelated to the activity that is the object of investment services companies, counselors shall verify, prior to the granting of the power, the concurrence of the requirement of the business and professional reputation in the proxy and revoked the granted powers when he removed this requirement.

Also, if the company's investment services is dependent on a financial joint holding company that is part of a financial conglomerate, that persons who take care of the effective direction of the mixed financial holding company have recognized reputation and experience.»

Four. (Letter c) of paragraph 4, the letter f) paragraph 6, paragraph 7 and a new paragraph 15 of article 86 are written in the following way: «(4. c) that a company whose main activity consists of having holdings in financial institutions, an individual, a group of persons acting in concert, systematically or not consolidatable entity under this Act» to handle various entities defined in paragraph 6 of this article, at least one of them being an investment services company, and provided investment services companies are the relative dimension between the financial entities, in accordance with the criteria established for the purpose the Minister of economy and finance.

«(6 f) entities whose main activity is the holding of shares, except that case of mixed financial holding companies subject to supervision at financial conglomerate level.» «» 7. for the purposes referred to in paragraph 4, insurance entities will not form part of the consolidated groups of investment services companies.»

«15. the consolidated groups of investment firms will benefit from processes of risk management and internal control mechanisms appropriate, including administrative procedures and accounting solids, and all entities or companies that integrate them must have appropriate mechanisms to provide the information that is necessary for the required compliance to the group.»

5. The last paragraph of article 99 shall be deleted. In addition, the letters e), e bis) and k) are worded in the following way, and it adds a new letter l bis) to article 99 with the following wording: «e) breach of the obligation of consolidation in article 86 of this law, as well as lacking the societies referred to in that article of the accounting and legally required records take them with vices or essential irregularities that prevent knowing the asset and financial situation of the entity, the consolidatable group or financial conglomerate belonging or not to include operations carrying out or in to mediate.

«(e bis) present the entities subject to the prudential supervision of the National Commission of the market of stock, the consolidated groups of companies of investment services and financial conglomerates that these integrates, deficiencies in administrative and accounting procedures and internal control procedures, including those relating to the management of risks, when these deficiencies would endanger its solvency or viability of the institution or the Group consolidatable or conglomerate financial» to which it belongs.»

'(k) the reduction of own resources of the companies of services, investment or financial conglomerate or consolidatable group to which they belong, to a lower level to 80 per cent of which is enforceable, remaining in this position for at least six consecutive months.'
«(l bis) the lack of referral by the companies of investment services to the National Commission of the stock market of all information or documents must refer you or require in the exercise of its functions, or its lack of veracity, when this is makes it difficult for the assessment of the solvency of the entity or the consolidatable or conglomerate financial group in which it is incorporated. " For the purposes of this letter, means that there is a lack of remission when this does not occur within the period granted to the effect by the National Commission of the stock market to remind in writing the obligation or reiterate the requirement.»

6. 1 letter c bis) and a new letter n) of article 100 are worded in the following way: «(c bis) present the entities subject to the prudential supervision of the National Commission of the market of stock, the consolidated groups of companies of investment services and financial conglomerates that these integrates, deficiencies in administrative and accounting procedures and internal control procedures» including those related to risk management, after expiry of the term granted to the effect to its correction by the competent authorities and provided that this does not constitute a very serious breach".

'(n) incur service companies of investment or financial conglomerate or consolidatable group they belong in inadequate coverage of minimum equity requirements, remaining in such a situation for a period of at least six months, provided that this does not constitute infringement very serious in accordance with the provisions of the preceding article.

2. the last paragraph of article 100 is worded as follows: «the infringement referred to in subparagraph (a) bis) will be imposed jointly and severally liable to any of the shareholders Covenant partners.»

7. It introduces a new article 106 bis with the following wording: «article 106 bis.»

When violations typified in articles 99, 100 and 101 concerning obligations of the consolidated groups of investment firms, it shall be punished the obliged entity, and, if applicable, its administrators and managers.

Also when such offences relate to the obligations of financial conglomerates, the punitive measures provided for in this law shall apply to the obliged entity when it is a company of investment services or a financial mixed holding company, provided that in the latter case corresponds to the National Commission of the stock market act as coordinator of the supplementary supervision of the financial conglomerate. The measures concerned infringement may extend, if necessary, to the directors and management of the obliged entity.»

Chapter IV rules on insurance article 12. Modification of the text revised of the Act of ordination and supervision of private insurance, approved by Royal Legislative Decree 6/2004, of 29 October.

The text revised of the Act of ordination and supervision of private insurance, approved by Royal Legislative Decree 6/2004, of 29 October, is modified in the following terms: one. The following wording is given the letter e) of paragraph 2, introduces a new paragraph 4 bis and add a new letter h) in paragraph 6, all of article 5: 'e) indicate the contributions and participation in the capital stock or mutual fund partners, who will have to meet the requirements expressed in article 14 by expressly stating what partners have the status of credit institution, insurance undertaking or investment services company, as well as, where appropriate, entries, regardless of the amount, which is holder any partner in an insurance undertaking, a credit institution or an investment services company.

«4 bis. Shall be subject to prior consultation with the Member State of the European Union competent supervisory authority authorisation of an insurance company where any of the following circumstances: to) that the new entity will be controlled by an insurance company or reinsurer, a credit institution or a company of services of investment authorized in that State.

(b) that its control will be exercised by the dominant undertaking of an insurance or reinsurance, entity of an entity credit or an investment authorized in that State services company.

(c) that your control will be exercised by the same natural or legal persons controlling an insurance company or reinsurer, a credit institution or a company of services of investment authorized in that Member State.

Means that a company is controlled by another when any of the events contemplated in article 4 of law 24/1988, of July 28, of securities markets.

That query will achieve, in particular, the assessment of the suitability of the partners and the reputation and experience of the directors and management of the new entity or parent, and can be reiterated for the continuous assessment of compliance by the Spanish insurance entities from these requirements.

«(6. La solicitud de autorización deberá ser denegada cuando: h) (contributions or shares referred to in article 5(2) to exist. e), is that such a situation obstructs the proper exercise of management and supervision or not to ensure the sound and prudent management of the institution, or the directors and management of the financial institution which is its parent company» «, where it exists, do not have good repute or experience required.»

Two. Paragraph 1 of article 15 is drawn up in the following way: «1. who, under any title, bearing the address effective insurance entity, or an entity whose main activity consist in having holdings in insurance companies, will be persons of acknowledged repute and with the necessary conditions of professional qualification or experience, and shall be entered in the administrative register of senior insurance entities referred to in article 74.»

In any case, means carrying the effective address those who have administration charges or address, whereas such referrals in the letter to) of article 40.1. Legal persons may take positions of management, but in this case, they shall designate a natural person who meets the above requirements on your behalf."

3. (The first paragraph of paragraph 2, the first subparagraph of paragraph 3, letters a) & c) of paragraph 3, and a new paragraph 3 bis, all of article 20, will have the following wording: «2. for compliance with the solvency margin and, where appropriate, of other limitations and obligations under the law, the insurance companies will consolidate their financial statements with the other insurance companies or financial institutions which constitute them a unit of decision or» in which to participate in the sense referred to in article 185 of the corporations law.»

«3. the consolidated groups of insurance companies are subject to the duty of consolidation pursuant to this article, rules handed down in its development and, secondarily, to the standards contained in articles 42 to 49 of the commercial code and other applicable commercial legislation.» In addition, they will benefit from the processes of risk management and internal control mechanisms appropriate, including administrative procedures and accounting solids, and all entities and companies that integrate them must have appropriate mechanisms to provide the information that is necessary for the required compliance to the group.

In any case, the following rules shall apply: to) is considered to be a group of financial institutions a consolidatable group of insurance companies, determined by regulation the types of entities which are integrated at that, where any of the following circumstances: 1 that an insurance entity to other entities.

2nd the dominant entity is an entity whose main activity is to have stakes in insurance companies.

3rd that a company whose main activity consists of having holdings in financial institutions, an individual, a group of persons acting systematically in concert or in accordance with this law not consolidatable entity control to several financial institutions, at least one of them being an insurance company, and provided that the insurance companies are the largest relative dimension between financial institutions , in accordance with the criteria provided by the Minister of economy and finance to the effect.

When any of the last two circumstances, it will be up to the General Directorate of insurance and pension funds appoint the person or entity obliged to formulate and approve the annual accounts and the report consolidated management and proceeding with your deposit, corresponding to the required the appointment of Auditors of accounts. For the purposes of the above designation, the group insurance entities must notify its existence the General Directorate of insurance and pension funds, with an indication of the address and the name of the entity that exercises the control or its name, if it is a physical person.»
'(c) the General Directorate of insurance and pension funds may request information from individuals and inspect non-financial entities with which there is a relationship of control in the sense set out in paragraph 2 of this article, for purposes of determining its impact on the legal, financial and economic situation of insurance and its consolidated entities. «In particular, and in the case of the parent of an insurance company or reinsurer, the General Directorate of insurance and pension funds must be a general supervision of transactions between entities of insurance or your consolidatable group and the dominant non-financial entity and their dependents.»

«3 bis. For the purposes of the provisions of paragraph 2, credit institutions and investment service companies does not form part of the consolidatable group of insurance companies.»

Four. The first subparagraph of paragraph 1 and the letters c), e), l) and q) of paragraph 3 of article 40 are written in the following way: the insurance entities, including the dominant consolidated groups of insurance companies.»

(b) entities which, in his case, should formulate and approve the accounts and consolidated reporting of such groups.

(c) the obliged entities of financial conglomerates in the case of an insurance company or a mixed financial portfolio, provided that in the latter case corresponds to the General Directorate of insurance and pension funds play the role of coordinator of the supplementary supervision of the financial conglomerate.

(d) natural persons or entities that are holders of significant shareholdings or positions of management or direction to play in any of the above entities.

(e) the liquidators of insurance companies.»

«3 c the defect, the insurance companies or consolidated groups or conglomerates financial to which they belong, in the solvency margin in amount exceeding five percent of the amount and any failure in the guarantee fund» «» (3. e) lacking the required accounting legally or take it to substantial abnormalities that prevent or hinder significantly to meet the economic, patrimonial and financial situation of the entity or of the financial conglomerate or consolidatable group to which it belongs, as well as non-compliance with the obligation to submit its annual accounts to audit accounts in accordance with the legislation in force. "

«(3. l) the lack of referral to the Directorate General of insurance and pension funds of all information or documents must give the insurance company, already through its periodic, already through the attention of individual requirements that direct you the aforementioned Directorate-General in the exercise of its functions, or its lack of veracity, when it makes it difficult the assessment of the solvency of the insurance company» , or financial conglomerate or consolidatable group to which it belongs. For the purposes of this letter means that there is a lack of remission when this does not occur within the period granted for this purpose by the General Directorate of insurance and pension funds to recall the obligation of regular written or reiterate the requirement of individualized."

«(3. q) present the insurance entity, consolidatable of insurance companies group or financial conglomerate in which are integrated in the administrative and accounting organization, or deficiencies in internal control procedures, including those relating to the management of risks, when these deficiencies would endanger the solvency or viability of the insurance company or the financial conglomerate or consolidatable group to belong. "

5. C letters) and q) and a new letter r) of paragraph 4 of article 40 are written in the following way: «c) the defect, the insurance companies or financial conglomerates or consolidated groups to which they belong, in the solvency margin in lower to five per cent of the amount corresponding.» «» q) present the insurance entity, consolidatable of insurance companies group or financial conglomerate which integrates deficiencies in administrative and accounting or internal control procedures, including those relating to the management of risks, once elapsed the term granted to the effect to its correction by the competent authorities, and that this does not constitute infringement very always serious as provided in paragraph 3 above."

«(r) the breach of regulations in terms of concentration and risk limits.»

6. Paragraph 3 of article 71 is drawn up in the following way: «3. the Ministry of economy and finance will require that the insurance entities under its control have a good administrative and accounting organization and internal control and adequate risk management procedures. " Also your advertising shall comply with provisions of law 34/1988, 11th November, General advertising, and provisions of development, as well as the precise rules for their adaptation to the insurance entities listed in the regulation of this law.»

First additional provision. Normative references.

Mentions making text consolidated management and supervision of private insurance law, approved by Royal Legislative Decree 6/2004, of 29 October to securities firms and securities agencies shall be deemed investment services companies.

Second additional provision. Modification of the law 31/1985, 2 of August, of regulation of the basic rules on governing bodies of the savings banks.

Amending the second additional provision of Act 31/1985, 2 of August, of regulation of the basic rules on governing bodies of the savings banks, which reads as follows: «second. In the case of savings banks whose statutes to the entry into force of this Act collected as founding the Catholic Church entity or entities of public law of the same, the appointment procedure and the term of office of the representatives of the founding entity in the governing bodies, shall be governed by what is available in their statutes and must undergo in the other provisions of this law and its implementing rules.

Transitional provision. Adaptation of statutes and regulations of the savings banks referred to in the additional provision second law 31/1985, 2 of August, of regulation of the basic rules on governing bodies of the savings banks.

Savings banks referred to in the second additional provision of Act 31/1985, 2 of August, of regulation of the basic rules on governing bodies of the savings banks will adapt its statutes and regulations, as well as the composition of its governing bodies to the legal regime resulting from the aforementioned provision, in the wording given by this Act , in accordance with that set standards that find application or, failing that, within the period of six months from the entry into force of this law.

Repealing provision. Repeal legislation.

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

First final provision. Competence titles.

This law, which will have basic character, is run under the auspices of competence certificates referred to in article 149.1.11. 2nd and 13th of the Constitution.

Second final provision. Enabling the regulatory development.

Without prejudice to specific allotments to other bodies provided for in this law, enabled the Government to develop regulations provisions in it.

Third final provision. Entry into force.

This law shall enter into force the day following its publication in the «Official Gazette» and will be applied first to the supervision of accounts for the year 2005.

Therefore, command to all Spaniards, private individuals and authorities, which have and will keep this law.

Madrid, April 22, 2005.

JUAN CARLOS R.

The President of the Government, JOSÉ LUIS RODRÍGUEZ ZAPATERO