The Organic Law 8/1980 of 22 September of the financing of the Autonomous Communities establishes in Article 13a that " all the financial operations which the Autonomous Communities subscribe to, in accordance with the provisions of the Article 2.1 of the Organic Law 2/2012, of 27 April, are subject to the principle of financial prudence " recoing in the General Secretariat of the Treasury and Financial Policy the definition of that principle in relation to financial liabilities.

On the other hand, the recast text of the Local Law Regulatory Law, approved by Royal Legislative Decree of March 5, states in its article 48a that " all the financial operations that are signed by the Local corporations are subject to the principle of financial prudence ", the definition of which corresponds, in relation to financial liabilities, to the General Secretariat of the Treasury and Financial Policy.

In addition, the Royal Decree-Law 17/2014 of 26 December 2014, of measures of financial sustainability of the Autonomous Communities and Local and other economic entities, creates the Fund for the Financing of Autonomous Communities and the Funding Fund to Local Entities. Accession to the Fund for the Financing of Autonomous Communities, whether in its financial facility or the Autonomous Liquidity Fund, entails the attachment to the conditions of financial prudence in the terms set by the Secretariat. Treasury General and Financial Policy. In addition, in accordance with the aforementioned Royal Decree-Law 17/2014, transactions in securities and long-term credit operations shall require the express authorisation of the General Secretariat of the Treasury and Financial Policy.

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

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

First. Scope and principle of financial prudence.

Autonomous Communities and Local Entities may only arrange debt and financial derivative transactions in the terms set out in the following paragraphs.

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

Second. Instruments.

1. The Autonomous Communities and Local Entities within the scope of this Resolution may carry out borrowing operations through, inter alia, the following instruments:

a. Debt certificates under German law (Schuldschein).

b. Long-term securities negotiable or not, issued by public or private issuance, on wholesale or retail markets.

c. Short-term financing instruments.

d. Long-term loans.

e. Financial leases.

The use of instruments other than previous instruments shall be subject to the provisions of paragraph 7 of this Resolution.

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

Third. Financial conditions for borrowing operations.

The maximum total cost of borrowing operations, including fees and other expenses, except for the fees referred to in Annex 3, may not exceed the cost of the State's financing of the medium term of the operation, increased in the corresponding differential as set out in Annex 3 to this Resolution.

The Autonomous Communities and Local Entities that have their own valuation tools or independent external advice will be able to determine at the time of the transaction the cost of Treasury financing on the basis of the methodology contained in Annex 2 to this Resolution.

The rest of the Administrations, in order to know the cost of financing the State in each medium term, will use the table of fixed rates or the applicable maximum differentials for each reference that I publish monthly, by means of Resolution, the Directorate-General of the Treasury. The maximum published costs shall remain in force for as long as no new costs are published.

In the case of securities issues, the corresponding Administration shall establish the price using Annex 2 of the Resolution.

Compliance with the maximum cost condition will be considered at the time of the opening of the tender process in the case of public tenders or at the time of submission of the tender bids by the financial institutions in the financing case through a bilateral negotiation. The Autonomous Community should make explicit the use of Annex 1 or 2 in advance both in the public tender and in the bilateral negotiations, and should reflect the offers presented by the financial institutions with the methodology chosen by the Community. In the case of securities issues, compliance with the maximum cost condition shall be considered at the predetermined time for the fixing of the price on the day the issue is launched.

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

Fourth. Coordination of emissions.

Those administrations which provide for an operation as described in point 1.b of the second subparagraph shall inform the Treasury of the intended amount of the transaction, the date specified for its execution and the time limit. objective.

In the case of public emissions, the communication must be carried out at least 7 working days in advance. In the case of private placements, the notice shall be required only if the amount of the amount is more than or equal to EUR 500 million and shall be made at least two working days in advance.

If the General Secretariat of the Treasury and Financial Policy is not pronounced on the business day following receipt of the communication to issue negotiable securities, the transaction shall be deemed to be able to be announced and/or executed in the proposed dates, provided that the other conditions set out in this Resolution are respected.

Fifth. Transactions in financial derivatives.

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

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

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

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

4. The use of more complex financial derivatives, with high risk-taking, such as leveraged risk options, derivatives referred to the change of slope of interest rate curves, which link foreign currency interest rates. different, those referenced to the evolution of stock indices, those linked to the variation between currencies, or combinations thereof, shall be subject to the provisions of paragraph 7 of this Resolution.

5. In no case can they be hired:

a. Financial derivatives as defined in point 4 above without a maximum cost, except in the case of interest rate financial swaps or interest rate options at risk of assuming a variable rate without a penalty differential.

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

c. Financial derivatives involving a deferral in the financial burden or an increase in funding.

When, as a consequence of the restructuring of a financial derivative, or of a fixed rate loan constructed from a variable interest rate financing and an implied variable interest rate swap, it is A breakdown cost payable by the corresponding administration may be passed on to the new fixed rate of the restructured derivative, or on the new fixed rate of the fixed rate loan, as appropriate. This will not be considered a deferral in the financial burden or an increase in funding. The new type may exceed the limits as set out in the third paragraph only by the part corresponding to the break cost.

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

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

6. The formalisation of financial derivatives will require the signing of a standard framework contract in which the rights and obligations of these transactions are collected. You can also subscribe to a standard collateralisation contract on the market.

7. Derivatives contracted prior to the entry into force of this Resolution and which would not have expired, shall remain subject to the ISDA, CMOF or similar contracts that were in force at the time of the procurement.

Any migration of these derivatives to the new framework contracts specified in paragraph 6 above may in no case be expected to be paid by any of the Autonomous Community or Local Entity.

Sixth. Bans:

The following borrowing operations will be prohibited:

a. Those non-performing debt transactions in securities that include derivatives implied in the contracts, including early repayment options at the request of the financial creditor. However, the inclusion of early repayment options by the debtor shall not be prohibited.

Fixed interest rate financing operations constructed from a variable interest rate financing and an implicit variable interest rate swap will be allowed if they respect the remaining conditions. established in this Resolution.

b. Those whose financial structure involves a deferral of the financial burden. Zero coupon emissions shall only be allowed for periods equal to or less than 18 months.

c. Those containing trigger clauses linked to credit ratings or other economic-financial variables that involve the early repayment of the debt or a change in the financial terms of the debt.

Only the trigger clauses of the applicable interest rate will be valid, in the case where the maturities of the borrowing operations will cease to be covered by the Financing Funds to the Communities. Autonomous and Local Entities because the corresponding Administration decided to leave the Fund. Under no circumstances may the new interest rate be contrary to the maximum cost fixed for Autonomous Communities not attached to the Fund for the Financing of Autonomous Communities and the maximum cost of operations not covered by the Financing Fund. Local Entities, as set out in Annex 3 to this Resolution.

d. Non-performing debt transactions in securities arising from the subrogation of the General Administration in financial contracts of its public bodies and entities that assume the assumption of debts previously guaranteed by the Administration itself, in the event that the subrogation assumes an increase in the cost of the pre-existing operation.

e. Non-performing debt transactions in securities arising from the subrogation of the General Administration or one of its entities in other debts that are not financial in nature or which do not have an explicit endorsement of the Corresponding administration, and the cost of which is above the cost of borrowing to the equivalent average term of the Autonomous Community or Local Entity on the date the original operation was closed.

The establishment of assumption or subrogation commissions in these operations will also be prohibited.

f. Those arising from the transformation of debts of a non-financial nature from the Autonomous Community or Local Entity, in other financial liabilities whose cost is above the cost of borrowing to the average time limit equivalent to that of had the Autonomous Community or Local Entity on the date the original operation was closed.

g. Non-performing debt transactions in securities arising from the modification of a prior contract of the Autonomous Community or Local Entity, or of its public entities, in which the cost resulting from the operation exceeds financially the cost of the pre-existing operation.

In any case, the maximum financial cost shall be that set out in the third paragraph of this Resolution.

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

Fixed-interest-rate financing operations may include breaking costs in favor of one or any of the parties, regardless of whether early repayment is made on interest payment dates. In any event, such break costs may only reflect the economic injury of the cancellation of the transaction due to the change in the conditions of interest rate swaps from the formalisation or disbursement of the loan to the the timing of the depreciation of the same (or what is the same, the cancellation of the financial swap of interest rate variable-implicit fixed). The risk premium for the transaction, equivalent to the risk premium corresponding to the loan of being this at variable rate, cannot be incorporated for the average period from the date of the early repayment to the date of the transaction. amortization expected in the contract initially.

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

j. Those non-performing debt transactions in securities at the variable rate of interest where the reference Euribor used does not coincide with the interest settlement period, unless the market adjustment is included in the contract the margin between the reference used and the appropriate reference to the interest settlement period.

Seventh. Exceptional assumptions.

For financial transactions that do not comply with any of the conditions set out in this Resolution, a memory may be presented in which the financial convenience of the transaction is detailed, justifying that the does not put at risk the financial solvency of the debtor. In the case of complex derivative operations as defined in paragraph 5 (4) of this Resolution, the memory shall contain an explanation of the operation of the derivative and the intended purpose. The General Secretariat of the Treasury and Financial Policy shall assess, for the particular case, whether exceptionally the transaction meets the criteria of financial prudence, for which it shall issue a supporting report.

Eighth. Reporting obligations.

1. The Autonomous Communities and Local Entities have the obligation to communicate the final terms of all debt and derivative transactions and the global debt and derivatives portfolio to the Ministry of Finance and Public administrations in accordance with the reporting obligations set out in the legislation.

2. The General Secretariat of the Treasury and Financial Policy may request the Autonomous Communities or Local Entities to authorize the financial institutions to provide the Secretariat General with information on the risk each entity maintains the corresponding Autonomous Community or Local Entity, as well as the main characteristics of such operations.

Ninth. Repeal clause.

The Resolution of 5 February 2015, of the General Secretariat of the Treasury and Financial Policy, defining the principle of financial prudence applicable to debt transactions and derivatives of the local authorities, and of the autonomous communities which are benefiting from the Fund for the Financing of Autonomous Communities.

10th. Entry into force.

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

Madrid, July 31, 2015. -Secretary General of the Treasury and Financial Policy, Rosa María Sánchez-Yebra Alonso.

ANNEX 1

Fixed and differential interest rates on the cost of State financing for the purposes of compliance with the third paragraph of the Resolution of 31 July 2015, of the General Secretariat of the Treasury and Financial Policy

0.38

Life (Months)	Maximum Fixed Type	Maximum Differential over euribor 12 months	Maximum number of Euribor 6 months	Maximum amount over euribor 3 months	Differential maximum over euribor 1 month
1					2
2	-0.04				6
4	-0.03			0	7
5	-0.02			1	8
6	-0.01		-6
		-4	3	8
		-3	4	11
	9	0.03		-3	4	11
12	0.03	-14	-3	5	12
16	0.03	-16	-4	4	12
	17	0.04	-16	-4	5	13
18	0.05	-15	-3	5	13
19	0.06	-15	-3	6	14
20	-14	-14	-2	6	15
21	0.08	-13	-1	7	15
22	0.09	-12	0	8	16
23	0.11	-11		10	18
24	0.12	-10	2
	8	20	30	40
48	0.63	23	36	46	56
	60	43		55	65	75
72	1.24	58	70	80	90
84	1.49	70	82	92	102
	96	1.71	79	91	101	111
108	1.88	86	98	107	117
120	1.98	85	97	106	116
132	2.14	92	104	113	123
144	2.26	97	109	118	128
156	2.37	102	114	123	133
168	2.45	103	115	124
	2.49	102	114	123	133
192	2.55	104	116	125	135
		2.60	107	118	128	138
216	2.65	109	121	130	140
	228	2.70	112	124	133	143
240	2.75	115	127	136	146
252	2.80	118	130	139	149
264	2.84	121	132	142	152
276	2.88	123	135	144	154
288	2.91	126	138	147	157
300	2.95	129	141	150	160
	2.98	131	143	152	162
	324	2.99	133	144	153	164
336	3.00	134	146	155	165
348	3.02	135	147	156	166
	≥360	3.03	136	148	157	167

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

On these fixed or differential interest rates on Euribor, the maximum spreads contained in Annex 3 of this Resolution may be applied.

ANNEX 2

Methodology for the calculation of the cost of State funding for each medium term.

For fixed interest rates:

a. Profitability (Yield to Maturity Mid) of Treasury references closest to the average deadline is sought in a source of financial information, according to price contributors generated by the financial information source itself.

b. The profitability to the average life of the new operation is linearly interpolates.

For variable interest types:

a. Profitability (Yield to Maturity Mid) of Treasury references closest to the average deadline is sought in a source of financial information, according to price contributors generated by the financial information source itself.

b. The equivalent of these rentings is calculated in terms of differential over Euribor 6 months through the I-spread function and not by the Asset swap spread.

c. With the spread over Euribor 6 months of the two Treasury references closer to the average life of the new operation, it interpolated linearly to that average life.

d. If you want to set the spread on another Euribor reference other than the 6 month Euribor (Euribor 12 months, 3 months and 1 month), it is adjusted by the basis swap to the average time of the transaction.

ANNEX 3

Maximum spreads on the cost of State financing and other financial conditions applicable to the borrowing operations of Autonomous Communities and Local Entities.

1. For the Autonomous Communities, the maximum differentials on the cost of State funding will be:

a. For the Autonomous Communities attached to the Fund for the Financing of Autonomous Communities:

i. Non-performing transactions in securities whose maturities are covered by the Financing Fund for Autonomous Communities: 20 basis points.

ii. Non-performing transactions in securities whose maturities are not covered by the Financing Fund for Autonomous Communities: 30 basis points.

b. For the Autonomous Communities not attached to the Fund for the Financing of Autonomous Communities:

i. Non-instrumented long-term operations: 40 basis points.

ii. Non-instrumented short term operations: 30 basis points.

2. For Local Entities, the maximum differentials on the cost of State funding will be:

i. Non-instrumented transactions in securities whose maturities are covered by the Local Entities Financing Fund: 20 basis points.

ii. Non-instrumented transactions in securities whose maturities are not covered by the Financing Fund to Local Entities:

a. Concerted operations by Local Entities that meet eligibility conditions to the Economic Boost Fund: 40 basis points.

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

3. For the Autonomous Communities and Local Entities, in the case of debt transactions with an average life of more than 10 years, the maximum differentials set out in points 1 and 2 above may be increased at a basic point. for additional year, up to a maximum of 15 additional basis points.

4. In the case of transactions in securities, the maximum permitted spread shall be fixed in each operation by means of a report by the General Secretariat of the Treasury and Financial Policy taking into account the market situation and the particularities of the operation. In the case of issues of securities of the Autonomous Communities, this report shall be incorporated in the report which, according to the Agreement of the Fiscal and Financial Policy Council of 6 March 2003, is to be issued by the General Secretariat of the Treasury and Financial Policy for all transactions that require the authorization of debt by the State, according to Article 14 of Organic Law 8/1980, of 22 September, of financing of the Communities

5. They shall be considered for short-term operations with an average life of less than or equal to 12 months.

6. For the maximum rates described in points 1, 2 and 3 above, only the following commissions may be added:

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

b. Agency commission for syndicated operations, with a maximum of 50,000 € per year.

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