Order ECC/149/2012 of 30 January developing Article 49.2.b of State Budget Law 39/2010 regarding State Guarantees for Credit Entities

OFFICIAL STATE BULLETIN No. 27 Wednesday, February 1, 2012 Sec. I. Page 9069 I. GENERAL PROVISIONS MINISTRY OF ECONOMY AND COMPETITIVENESS 1533 Order ECC/149/2012, of January 30, developing paragraph Two.b) of Article 49 of Law 39/2010, of December 22, on the General State Budgets for the year 2011.

At the onset of the international financial crisis and in coordination with other governments of the European Union, the Government of Spain approved Royal Decree-Law 7/2008, of October 13, on Urgent Measures in Economic-Financial Matters in relation to the Concerted Action Plan of the Euro Area countries to address the impact of said crisis on the financing of credit entities. The aforementioned royal decree-law was developed through Order EHA/3364/2008, of November 21. Through Orders of the Minister of Economy and Finance of December 29, 2008, and of the Minister of Economy and Finance of September 30, 2009, guarantees from the General State Administration were granted in accordance with the provisions of the aforementioned norms. The guarantee program thus launched effectively contributed to facilitating access to capital markets for the beneficiary credit entities in an environment of strong tensions.

However, the sovereign debt crisis in the Eurozone has generated an increase in risk premiums demanded from credit entities in countries belonging to the Economic and Monetary Union and has further hindered their access to wholesale financing markets. This situation, combined with the relevant concentration of maturity dates for issuances that financial entities face during 2012, makes it necessary to adopt measures that facilitate access to financing for entities and, in this way, promote credit to the private sector in the coming months.

In response to this situation, the Summit of Heads of State and Government of the Eurozone of October 26, 2011, agreed on the launch of the so-called banking package, aimed at avoiding an abrupt deleveraging process of financial entities in the Eurozone and a possible restriction of available credit for the real economy. This banking package is structured on two pillars: on the one hand, a process of strengthening the capital of large entities; on the other hand, a coordinated and effective system of guarantees from Member States to facilitate banks' access to medium and long-term financing.

Thus, the European Commission Communication of December 1, 2011, on the application, from January 1, 2012, of state aid rules to bank support measures in the context of the financial crisis, has extended the European regulatory framework applicable during the financial crisis and has revised the methodology for establishing the minimum commissions that beneficiary entities must pay for guarantees, taking into account the evolution of the risk profile of entities since the beginning of the crisis.

In this context and in line with decisions adopted within the European Union, Royal Decree-Law 20/2011, of December 30, on urgent measures in budgetary, tax, and financial matters for the correction of the public deficit, authorizes the granting of guarantees from the General State Administration to new bond and obligation issuances carried out by credit entities resident in Spain with significant activity in the national credit market.

In accordance with this regulation, the Order determines the requirements to apply for the guarantee, the procedure, and the granting and utilization commissions for the guarantees granted. cve: BOE-A-2012-1533

OFFICIAL STATE BULLETIN No. 27 Wednesday, February 1, 2012 Sec. I. Page 9070 It should be noted that in the drafting of this Order, the aforementioned European state aid regulation for the financial sector has been taken into account. In accordance with it, the granting of guarantees is proposed with a limited temporal validity. Likewise, the commissions accrued by guaranteed issuances will be determined according to the criteria established for this purpose. In any case, and in line with usual practice regarding guarantees granted under Royal Decree-Law 7/2008, of October 13, the need to maintain or modify the current guarantee program will be evaluated semi-annually based on the persistence of the reasons justifying its validity.

The rule develops the requirements that entities or groups of entities must meet to apply for the guarantee.

The requirements that issuances eligible for guarantee must satisfy are also specified, and the commissions accrued for the guarantee are regulated.

Thus, on the one hand, and in order to guarantee greater efficiency in the application and granting process of guarantees, a granting commission has been introduced whose payment is mandatory for the granting of the guarantee and whose purpose is to incorporate incentives for entities to adjust their applications to their real financing needs.

On the other hand, the requirement of a commission for guaranteed issuance is maintained, as has been done in the guarantee programs developed under Royal Decree-Law 7/2008, of October 13. In this sense, each issuance of guaranteed securities will accrue a commission in favor of the General State Administration, which will be calculated according to the criteria established in Annex I of the Order, established in accordance with the aforementioned European Commission Communication of December 1, 2011.

Finally, the rule refers to the granting of guarantees. The amount of guarantee granted to an entity will be determined by the amount requested by said entity and by the weight of its market share relative to the sum of the market shares of all applying entities. If the requested guarantee amount were lower than that corresponding to the entity based on the weight of its market share relative to the total of applicants, the requested amount would be granted, and the excess would be distributed among the other applying entities according to the same criterion of the relative weight of their market shares.

In this way, it is expected to facilitate access of entities to financing sources, thus fulfilling the ultimate purpose of the rule, which is to contribute to the normalization of credit flows to families and companies. Once the guarantee is granted, entities may carry out the specific issuances within the timeframes indicated for this purpose.

Due to the significant economic commitment assumed with the launch of this measure, and in order to safeguard the general interest, since the General State Administration, in its capacity as guarantor, holds all and each of the rights recognized by applicable legislation for the case of execution of the guarantee, it is also imposed in the single additional provision on the General Secretariat of the Treasury and Financial Policy the obligation to communicate to the Bank of Spain such execution, in case it were appropriate to adopt any of the measures contained, among other provisions, in Law 26/1988, of July 29, on Discipline and Intervention of Credit Entities.

This Order is issued by virtue of the authorization contemplated in the third paragraph of letter b) of paragraph Two of Article 49 of Law 39/2010, of December 22, on the General State Budgets for the year 2011, in the wording given by the final seventeenth provision of Royal Decree-Law 20/2011, of December 30, on urgent measures in budgetary, tax, and financial matters for the correction of the public deficit.

By virtue thereof, and in agreement with the Council of State, I decree: Article 1. Characteristics of the guarantee. Guarantees will be granted with waiver of the benefit of excussion of Article 1830 of the Civil Code and with irrevocable and unconditional character, under the terms established by the granting orders. cve: BOE-A-2012-1533

OFFICIAL STATE BULLETIN No. 27 Wednesday, February 1, 2012 Sec. I. Page 9071 Article 2. Entities that may apply for the guarantee. Requirements.

1. The following may apply for guarantees: a) Credit entities. b) Consolidatable groups of credit entities. c) Aggregations of credit entities.
2. Credit entities must meet the following requirements: a) Have their registered office in Spain. b) Have a share of at least one per thousand of the total of item 2.4. "Loans and credits. Other sectors" corresponding to Residents in Spain from the last UEM 1 statement (Summary Balance. Business in Spain) published in the Statistical Bulletin of the Bank of Spain. c) Have issued, with or without guarantee from the General State Administration, values analogous to those that may be subject to the guarantee regulated by this Order between 2007 and 2011. If the applying entity were the result of a structural modification process regulated in Law 3/2009, of April 3, on structural modifications of commercial companies, this requirement will be understood as satisfied provided that such issuances were carried out by any of the entities participating in the structural modification process.
3. Each consolidatable group of credit entities will submit a single application. The requirements established in letters a) and c) of the previous paragraph must be satisfied by at least one of the entities in the group. The requirement indicated in letter b) of the previous paragraph is understood to be required at the group level and, for the purposes of computing said joint share, only the amount corresponding to entities integrated in the same that have their registered office in Spain will be included. In any case, the applying entity must meet the requirement established in letter a) of the previous paragraph.

Notwithstanding, a credit entity belonging to a consolidatable group that meets what is provided in letters a) and c) of the previous paragraph may submit a separate application from that of the group to which it belongs provided that, regarding the requirement established in letter b) of the previous paragraph, the share of that entity is at least five per thousand. 4. Credit entities with registered office in Spain that have ceded the management of their liquidity in the interbank market in a systematic manner to another entity with which they have a contractual clearing agreement, may aggregate the shares of all of them in the entity assigned the management. The aggregation thus formed must meet the requirements indicated in letters b) and c) of paragraph 2 of this Article. For these purposes, the requirement established in letter b) of paragraph 2 will be understood to be required at the level of the aggregation. As for the requirement indicated in letter c) of said paragraph, it will be required, at least, from one of the entities that form part of the aggregation. It will be the entity carrying the management that may submit the guarantee application. The guarantee thus applied for will be granted exclusively in favor of said applying entity, which will be the only one authorized to carry out the guaranteed issuances. 5. The applying entity or, in case the applying entity finds itself in one of the situations foreseen in Law 3/2009, of April 3, on structural modifications of commercial companies, the entity or entities to which the assets and liabilities that formed the economic unit of the banking business of the applying entity are attributed in proportion to the value of the banking business assigned to each of them, may issue with guarantee from the General State Administration. cve: BOE-A-2012-1533

OFFICIAL STATE BULLETIN No. 27 Wednesday, February 1, 2012 Sec. I. Page 9072 Article 3. Bond and obligation issuances that may be guaranteed. Bond and obligation issuances carried out in Spain may be guaranteed when they meet the following requirements:

1. Type of security: Non-subordinated debt securities and non-guaranteed with other types of guarantees.
2. Issuance term: Beneficiary entities of the guarantee may carry out guaranteed issuances until June 30, 2012. Said term may be extended by resolution of the General Secretariat of the Treasury and Financial Policy based on possible extension authorizations from the European Commission.
3. Maturity term: The maturity term must be between one and five years.
4. Yield: The interest rate may be fixed or variable. In the case of variable interest rate, the reference rate must be widely disseminated and used in financial markets.
5. Structure of guaranteed operations: Amortization must be made in a single payment. Likewise, guaranteed issuances will not incorporate options, nor other financial derivative instruments, nor any other element that complicates the valuation of the risk assumed by the guarantor.
6. Minimum amount: The nominal value of each issuance cannot be less than 10 million euros.
7. Admission to trading: The securities must be admitted to trading on official Spanish secondary markets. Article 4. Commissions.
8. In accordance with what is provided in letter b) of paragraph Two of Article 49 of Law 39/2010, of December 22, on the General State Budgets for the year 2011, and in Article 117 of Law 47/2003, of November 26, General Budgetary, guarantees granted by the General State Administration will accrue, in its favor, the following commissions: a) The granting of guarantee will accrue a commission of 0.5% of the total granted, whose payment must be accredited by the entity prior to the formalization of the guarantee by the Minister of Economy and Competitiveness. b) Each guaranteed issuance of bonds or obligations will accrue an issuance commission, whose payment the issuing entity must accredit before proceeding to the issuance. The amounts paid in concept of guarantee granting commission will be fully deducted from this issuance commission. The criteria for calculating issuance commissions are established in Annex I of this Order, in accordance with the guidelines for calculating guarantee prices collected in the European Commission Communication of December 1, 2011, on the application, from January 1, 2012, of state aid rules to bank support measures in the context of the financial crisis.
9. The General Secretariat of the Treasury and Financial Policy will settle the commissions collected in paragraph 1 of this Article and establish the terms in which said commissions must be made effective. Article 5. Applications for the granting of guarantees.
10. Interested entities must submit their application for the granting of guarantee, signed by the entity's representative, according to the model established in Annex II of this Order, before the General Secretariat of the Treasury and Financial Policy, which will be responsible for its processing. cve: BOE-A-2012-1533

OFFICIAL STATE BULLETIN No. 27 Wednesday, February 1, 2012 Sec. I. Page 9073 2. Except in the exceptional case contemplated in the second paragraph of Article 2.3, no more than one application may be submitted per credit entity, consolidatable group, or aggregation. 3. The term to submit guarantee granting applications will begin the day following the publication of this Order in the "Boletín Oficial del Estado" and will end on February 6, 2012. 4. Along with the application, at least the following documentation must be presented: – Original or certified copy of the power of attorney sufficient for the purpose of the entity's representative. – Certified copy of the ID card of the entity's representative. – Data regarding issuances carried out between 2007 and 2011 of bonds and obligations that meet the requirements demanded regarding the requested guarantee, with the following data: type of security, ISIN code, issued amount, term, and resulting interest rate at the time of issuance. – The General Secretariat of the Treasury and Financial Policy may request clarifications it deems appropriate regarding the information presented by each entity, group, or aggregation, as well as any additional information it considers convenient. Article 6. Granting of guarantees.

1. The maximum amount of guarantee to be granted to applying credit entities will be 100,000 million euros, in accordance with what is established in paragraph Two.b) of Article 49 of Law 39/2010, of December 22, on the General State Budgets for the year 2011.
2. The Minister of Economy and Competitiveness will grant to each of the applying entities the amount resulting from applying the following criteria: a) It will start from the allocation to each of the applying entities of the guarantee amount recorded in its application, with the limit resulting from multiplying the maximum guarantee amount collected in paragraph 1 by the weight of its market share over the shares of the set of applying entities. The market share will be taken from item 2.4. "Loans and credits. Other sectors" corresponding to Residents in Spain from the last UEM 1 statement (Summary Balance. Business in Spain) published in the Statistical Bulletin of the Bank of Spain. b) If the allocation according to the previous paragraph results in the appearance of a remainder with respect to the maximum guarantee amount established in paragraph 1, said remainder will be distributed among the applying entities according to the criterion established in the previous letter a), and in no case can the amount granted to an entity exceed the amount recorded by it in its application.
3. Notwithstanding, in accordance with Article 118 of Law 47/2003, of November 26, General Budgetary, the amount to be guaranteed resulting from applying the criterion collected in the previous paragraph may be limited to minimize the risk of execution of the guarantees.
4. The Minister of Economy and Competitiveness may request reports from the Bank of Spain he deems appropriate for the purposes of assessing compliance with the criteria established in this Article.
5. The order of the Minister of Economy and Competitiveness granting guarantee to each entity or group of entities will be notified to each applicant by the General Secretariat of the Treasury and Financial Policy. First Additional Provision. Communication to the Bank of Spain in case of execution of the guarantee. In case of execution of the guarantee, the General Secretariat of the Treasury and Financial Policy will communicate this circumstance to the Bank of Spain in case it were appropriate to adopt any of the measures contained, among other provisions, in Law 26/1988, of July 29, on Discipline and Intervention of Credit Entities. cve: BOE-A-2012-1533

OFFICIAL STATE BULLETIN No. 27 Wednesday, February 1, 2012 Sec. I. Page 9074 Second Additional Provision. Authorization of the European Commission. The guarantees regulated in this Order may only be granted after the mandatory authorization by the European Commission. Single Derogatory Provision. Derogation of regulations. All provisions of equal or lower rank that oppose what is established in this Order are hereby repealed. First Final Provision. Authorization. The Secretary General of the Treasury and Financial Policy is authorized to issue any resolutions necessary for the application and execution of what is provided in this Order, in particular to modify Annex I in case of changes in the criteria established by the European Commission for calculating the minimum price of state guarantees. Second Final Provision. Supplementary rules. The procedure for the granting of guarantees will be governed, in what is not provided for by the norms established in letter b) of paragraph Two of Article 49 of Law 39/2010, of December 22, on the General State Budgets for the year 2011, and in this Order, by Law 30/1992, of November 26, on the Legal Regime of Public Administrations and Common Administrative Procedure, and by Law 47/2003, of November 26, General Budgetary. Third Final Provision. Entry into force. This Order will enter into force on the same day of its publication in the "Boletín Oficial del Estado". Madrid, January 30, 2012.–The Minister of Economy and Competitiveness, Luis de Guindos Jurado.

ANNEX I Criteria for the calculation of issuance commissions

1. Formula for the determination of the guarantee issuance commission The commission for the guarantee that will be applied to the nominal of each bond or obligation issuance will be the sum of the following components: i) 40 basis points. ii) 40 basis points for half of the ratio between the median of the credit default swap (CDS) senior five-year hedging differentials of the issuing entity during the three years ending one month before the date of issuance of the guaranteed bonds or obligations and the median of the iTraxx Europe Senior Financial five-year index during the same three-year period. iii) 40 basis points for half of the ratio between the median of the medians of the senior five-year CDS differentials of all Member States of the European Union that have CDS differential data and the median of the CDS differentials of Spain for five years during the same three-year period. cve: BOE-A-2012-1533

OFFICIAL STATE BULLETIN No. 27 Wednesday, February 1, 2012 Sec. I. Page 9075 The aforementioned components will be calculated for each of the issuances carried out. In case of having CDS differentials denominated in different currencies, those corresponding to the most liquid markets will be taken into account. 2. Issuers without representative CDS differentials For issuers that have a credit rating but lack CDS differential data from at least one widely disseminated financial information provider or these are not considered representative by the Bank of Spain, for the purposes of calculating the numerator of the ratio in point ii) of the previous paragraph, the median of the medians of the five-year CDS differentials, during the same three-year period, of a basket of entities from the Member States of the European Union representative of its same credit quality category will be taken. Three credit quality categories will be considered, "AA", "A" and "BBB or lower", each encompassing the different corresponding steps. For the purposes of identifying the category corresponding to an issuer, the best of the credit ratings available at the time of issuance among the three main rating agencies will be taken into account, a single credit rating being sufficient to consider that the issuer has a rating. 3. Issuers without credit rating For issuers that lack CDS differential data from at least one widely disseminated financial information provider at the time of issuance, or these are not representative according to the judgment of the Bank of Spain,