Order ECC/2575/2015 Determining Content, Structure and Publication Requirements for Annual Corporate Governance Reports and Accounting Obligations for Banking Foundations

OFFICIAL STATE GAZETTE No. 290 Friday, December 4, 2015 Sec. I. Page 114989 I. GENERAL PROVISIONS MINISTRY OF ECONOMY AND COMPETITIVENESS 13141 Order ECC/2575/2015, of November 30, determining the content, structure and publication requirements of the annual corporate governance report, and establishing the accounting obligations of banking foundations.

INDEX Chapter I. General Provisions. Article 1. Purpose. Article 2. Scope of application. Chapter II. Annual corporate governance report. Section 1. General Provisions. Article 3. Principle of informative transparency. Article 4. Responsibility for the annual corporate governance report. Section 2. Content and structure of the annual corporate governance report. Article 5. Content and structure of the annual corporate governance report. Article 6. Structure, composition and functioning of the governing bodies. Article 7. Determination of the appointment policy. Article 8. Investment policy in the participating credit institution. Article 9. Other investments: actions and policy followed. Article 10. Remuneration policy and reimbursed expenses. Article 11. Information on reimbursed expenses. Article 12. Information on remuneration. Article 13. Related-party transactions. Article 14. Policy on conflicts of interest. Article 15. Social work activity developed. Section 3. Submission and publication requirements. Article 16. Obligations to submit the annual corporate governance report. Article 17. Obligations to publish the annual corporate governance report. Chapter III. Financial information standards and models applicable to banking foundations. Article 18. Financial information standards and models. Article 19. Financial information. Article 20. Determination of accounting obligations. Article 21. Models of public financial statements. Additional Provision First. Temporal scope of the annual corporate governance report. Additional Provision Second. Corporate governance report corresponding to the 2014 fiscal year. Final Provision First. Modification of Order ECC/461/2013, of March 20, determining the content and structure of the annual corporate governance report, the annual remuneration report and other information instruments of listed joint-stock companies, savings banks and other entities issuing securities admitted to trading on official securities markets. cve: BOE-A-2015-13141 Verifiable at http://www.boe.es

OFFICIAL STATE GAZETTE No. 290 Friday, December 4, 2015 Sec. I. Page 114990 information instruments of listed joint-stock companies, savings banks and other entities issuing securities admitted to trading on official securities markets. Final Provision Second. Competence title. Final Provision Third. Regulatory authorization. Final Provision Fourth. Entry into force. Annex. Model of annual corporate governance report of banking foundations.

Law 26/2013, of December 27, on savings banks and banking foundations, profoundly modified the regime of savings banks and concluded a process carried out in recent years whereby certain savings banks were required to transfer their financial activity to a banking entity and maintain only the foundational activity, in order to achieve greater professionalism in the exercise of their activities.

In this framework, Law 26/2013, of December 27, deemed it appropriate to introduce provisions that strengthened the corporate governance of savings banks and banking foundations and increased transparency in their operation.

There were two elements that needed special attention to improve the operation of savings banks and banking foundations: the first is corporate governance, for which Law 26/2013, of December 27, contains a set of regulations governing the constitution and operation of the governing bodies of these entities, seeking a return to the traditional model of savings banks as entities of reduced size and linked to their territory of origin. The second is transparency, for which it is required that banking foundations, like savings banks, prepare an annual report covering their corporate governance and remuneration policy, all under the understanding that this ensures the proper functioning of these entities, and by extension, of the financial markets.

In particular, the creation of banking foundations requires that regulations governing their operation and organization be issued, and equally, and this is the object of this ministerial order, that corporate governance and remuneration publication regulations applicable to banking foundations be developed. In this way, the mandate provided for in Article 48 of Law 26/2013, of December 27, is fulfilled, which requires banking foundations to make public annually a corporate governance report.

As a result, Article 48 of Law 26/2013, of December 27, prescribes the content that the corporate governance report of banking foundations must have, authorizing the Minister of Economy and Competitiveness to format and specify its content and the obligations of preparation and publication. In any case, it is important to highlight that this article refers to the "minimum content" that the report will have in any case, so it does not prevent other related aspects from being included in it that, although not expressly mentioned, are relevant from the perspective of good corporate governance.

On the other hand, due to the special nature of this type of entity, as an entity at once of a foundational character and of financial relevance, it is necessary to adapt the accounting regulations to take into account their peculiarities, as required by Article 46 of Law 26/2013, of December 27, which authorizes the Minister of Economy and Competitiveness, or the Bank of Spain with the express authorization of the Minister, to develop the standards and models to which the accounting of banking foundations must adhere.

To collect these mandates, the ministerial order has been structured in three chapters: in the first, the purpose and scope of application are fixed; the second contains the rules applicable to the annual corporate governance report; and the third is dedicated to the accounting rules applicable to banking foundations.

In addition, this ministerial order includes an annex in which the format in which the annual corporate governance report must be presented is designed, using tables, and includes instructions and definitions intended to facilitate and homogenize the work of preparing the report. cve: BOE-A-2015-13141 Verifiable at http://www.boe.es

OFFICIAL STATE GAZETTE No. 290 Friday, December 4, 2015 Sec. I. Page 114991 and includes instructions and definitions intended to facilitate and homogenize the work of preparing the report.

In Chapter I, as we have indicated, the purpose and scope of application of the ministerial order are included, referring to the definition of banking foundation provided in Law 26/2013, of December 27, and collecting the regulatory development mandates that this law provides for.

Chapter II is divided into three sections. In the first section, the principle of informative transparency is introduced, which obliges the annual corporate governance report to be prepared with complete and relevant information, to obtain an adequate view of the situation of the banking foundation. In addition, the board of directors, as the highest governing body of the foundation, is attributed ultimate responsibility for the preparation of the annual report.

The second section describes in more detail the content of the annual report, in accordance with the structure provided for in Article 48 of Law 26/2013, of December 27.

First, information must be provided regarding the structure, composition and functioning of the governing bodies of banking foundations, which also affects the general manager, senior management and members of the delegated committees of the board of directors. The information collected under this heading will provide a double vision, static and dynamic, of how the banking foundation is organized and operates.

Information is also requested on the appointment policy of the banking foundation, both in the banking foundation itself and in the banking entity in which it participates, in order to know how the banking foundation guarantees that the persons who make up its governing bodies are the most suitable.

Under a third heading, information is demanded on the investment policy of the banking foundation in the participating credit institution, an aspect of great interest to understand the operation of the banking foundation and the participating credit institution, as it clarifies the interrelationships between both entities and allows detecting how the needs of the banking foundation affect the management of the credit institution.

Subsequently, in parallel with what is provided for in the previous point, information is required on the investment policy of the banking foundation in other entities.

Another important element of the annual corporate governance report is the information on remuneration, which is regulated extensively also in this second section.

Since the remuneration policy is an aspect intimately connected with the good corporate governance of institutions, the ministerial order acts with a high level of detail. The information requested in this regard must reflect completely the income received by the personnel of the governing bodies in the exercise of their functions.

This heading also includes information regarding the reimbursement of expenses incurred by the board members in the exercise of their functions. Of course, in this case one cannot speak of a remuneration, since the function of the board member, as prescribed by Law 26/2013, of December 27, cannot be remunerated. But from the perspective of good corporate governance, it is important to achieve as much transparency as possible on this point and to know the magnitude of these reimbursements, given the confusion that has sometimes occurred between the concepts of remuneration and reimbursable expense and the possibility that such confusion may result in a detriment to the standards of good corporate governance. In this line, it must be clarified that any mention of remuneration of board members made in the ministerial order refers to those they may receive for the exceptional provision of services other than those corresponding to them as members of the board of directors.

Likewise, due to its potential to generate unwanted practices, information is requested on the transactions that the banking foundation may have concluded with parties having a special link with it, and on situations susceptible of originating conflicts of interest and the mechanisms to resolve them. cve: BOE-A-2015-13141 Verifiable at http://www.boe.es

OFFICIAL STATE GAZETTE No. 290 Friday, December 4, 2015 Sec. I. Page 114992 Finally, within this section, it is required that sufficient information be provided regarding the foundational activity of the banking foundation, which will constitute the essential core of its actions.

The third section regulates the procedure for submitting the corporate governance report, indicating the deadline for doing so and the publicity obligations applicable to it, all based on the principle that corporate governance reports are truly useful if they enjoy adequate dissemination that guarantees their knowledge by the public.

As for Chapter III, it determines the scope of the authorization to the Bank of Spain for the development of the standards and models of financial information of banking foundations. These standards and models, in addition to attending to the true image of the foundation and allowing its comparability, must be useful as an instrument to provide relevant information to the supervisor of the credit institution in which the foundation participates. Thus, in order to obtain a true and comparable image, the models of the public financial statements will be presented with a format and periodicity determined by the Bank of Spain and the data contained in said models must be used in the communications of the entity. It will also be taken into account that foundations operate in the context of the single internal market, so that the standards and models developed by the Bank of Spain must comply with the guidelines issued by the European Union. On the other hand, in order to facilitate the supervision work, the financial information must be presented in public and reserved financial statements.

Finally, the annex includes the format in which the information regarding the corporate governance of banking foundations must be presented, opting to replicate the table model used in the preparation of other corporate governance reports, as it is easy to comply with, provides the necessary clarity and uniformity, and adheres to a report structure already known by the financial sector.

Additionally, the first final provision modifies Order ECC/461/2013, of March 20, determining the content and structure of the annual corporate governance report, the annual remuneration report and other information instruments of listed joint-stock companies, savings banks and other entities issuing securities admitted to trading on official securities markets. This modification aims to authorize the National Securities Market Commission to update the content and structure of these reports to the recent Law 31/2014, of December 3, modifying the Capital Companies Law for the improvement of corporate governance and the new Code of good governance of listed companies, approved by Agreement of the Council of said body on February 18 of last year.

By virtue thereof, and in accordance with the Council of State, I order:

CHAPTER I General Provisions

Article 1. Purpose.

1. Banking foundations will make public, on an annual basis, a corporate governance report, the content, structure and publication requirements of which will comply with what is provided in Law 26/2013, of December 27, on savings banks and banking foundations and in this ministerial order.
2. This order has the following purpose: a) To determine the minimum content, structure and publication requirements of the annual corporate governance report of banking foundations, in development of what is provided in Article 48.1 of Law 26/2013, of December 27. b) To develop the standards and models to which the accounting of banking foundations must adhere, in accordance with what is provided in paragraph 3 of Article 46 of Law 26/2013, of December 27. cve: BOE-A-2015-13141 Verifiable at http://www.boe.es

OFFICIAL STATE GAZETTE No. 290 Friday, December 4, 2015 Sec. I. Page 114993

Article 2. Scope of application. This order will be applicable to the banking foundations provided for in Title II of Law 26/2013, of December 27.

CHAPTER II Annual corporate governance report

Section 1. General Provisions

Article 3. Principle of informative transparency. The information included in the annual corporate governance report of banking foundations must be clear, complete and truthful, and may not contain information that induces error or confusion.

Article 4. Responsibility for the annual corporate governance report.

1. The board of directors of the banking foundation is the body responsible for the preparation, submission, publication and content of the annual corporate governance report.
2. The board of directors will approve and submit to the competent protectorate the annual corporate governance report accompanied by the certificate issued by the secretary with the approval of the president.

Section 2. Content and structure of the annual corporate governance report

Article 5. Content and structure of the annual corporate governance report.

1. The annual corporate governance report of banking foundations will have the minimum content provided for in this section, and will be structured in the following headings: a) Structure, composition and functioning of the governing bodies. b) Determination of the appointment policy. c) Investment policy in the participating credit institution. d) Other investments: actions and policy followed. e) Remuneration policy and reimbursed expenses. f) Related-party transactions. g) Policy on conflicts of interest. h) Social work activity developed.
2. The information that the annual corporate governance report must include will correspond to the events occurring in the economic year immediately preceding that of its submission to the protectorate.
3. The annual corporate governance report will comply with the format established in the annex of this order.

Article 6. Structure, composition and functioning of the governing bodies. The annual corporate governance report will include a heading titled "Structure, composition and functioning of the governing bodies", which will contain, at least, the following information:

1. Identifying data of the banking foundation and date of end of the reference fiscal year.
2. Structure of the governing bodies. a) Existing bodies, competencies and functions assigned to them, specifying whether they exercise them by delegation and the binding or advisory nature of their agreements. cve: BOE-A-2015-13141 Verifiable at http://www.boe.es

OFFICIAL STATE GAZETTE No. 290 Friday, December 4, 2015 Sec. I. Page 114994 b) Enumeration of competencies that are non-delegable. c) Existence or not of regulations of the board of directors and of the committees or other governing bodies, as well as indication of the place where, if any, they are available for consultation. Modifications made to them will also be indicated. 3. Composition of the governing bodies. a) Number of board members and justification of their proportionality in relation to the asset volume of the banking foundation. b) Identification of the board members and identification of the group to which each belongs. In the case of board members that are legal entities, the identity of the natural persons representing them will be included. c) Identification of board members who fall under the case provided for in the second transitional provision of Law 26/2013, of December 27. d) Detailed and reasoned justification, regarding each of the board members, of the fulfillment of the necessary requirements to belong to the corresponding group. In the case of board members belonging to the group provided for in Article 39.3.c) of Law 26/2013, of December 27, the significant contribution referred to in the last paragraph of paragraph 3 of said article will be identified. e) Identity of the president, the general manager, the secretary of the board of directors, with express mention of their status or not as board members and with a detailed and reasoned description of their professional experience for the purposes of performing their functions. f) Composition of the delegated committees and of the other committees and delegated or support bodies of the board of directors. 4. Functioning. a) Rules regarding the constitution of the governing bodies, quorum for attendance, setting of the agenda, regime for adopting agreements, information to be provided to their members and systems provided for the access of each of them to such information. b) Periodicity of meetings and rules regarding their convocation, along with reference to the cases in which their members may request the convocation of meetings to deal with matters they deem appropriate. The number of meetings that have been convened and held will be indicated. c) Internal systems established, if any, for the control of compliance with the agreements adopted by the governing bodies.

Article 7. Determination of the appointment policy. The annual corporate governance report will include a heading titled "Determination of the appointment policy" which will contain at least the following information:

1. Description of the appointment procedure applicable to the board of directors of the banking foundation and other governing bodies.
2. Description of the measures and processes implemented, if any, to ensure that the persons designated in the governing bodies of the banking foundation observe the requirements required by law to perform their functions.
3. Identification, if any, of specific bodies or committees that have been created to exercise functions related to the appointment policy.

Article 8. Investment policy in the participating credit institution. The annual corporate governance report will include a heading titled "Investment policy in the participating credit institution" which will contain, at least, the following information:

1. Objectives of the investment policy in the participating credit institution and criteria governing the management by the banking foundation of its participation in it. cve: BOE-A-2015-13141 Verifiable at http://www.boe.es

OFFICIAL STATE GAZETTE No. 290 Friday, December 4, 2015 Sec. I. Page 114995 2. Information on the acquisition and transfer operations of shares of the participating credit institution and on any other operation that may alter the voting rights of the banking foundation in the participating credit institution. 3. Policy maintained by the banking foundation regarding the distribution of results by the participating entity, including the distribution of dividends and the increase in own resources, and the manner in which the right to vote on these matters has been exercised. 4. Information, if any, on the policy of agreements of the banking foundation with other shareholders of the participating credit institution.

Likewise, information will be provided on agreements concluded with third parties that obligate it to adopt, through the concerted exercise of the voting rights it possesses, a common policy regarding the management of the participating credit institution or that have the object of influencing it in a relevant manner.

Article 9. Other investments: actions and policy followed. The annual corporate governance report will include a heading titled "Other investments: actions and policy followed" which will contain, at least, the following information:

1. Investment policy followed, the manner in which it has been applied and its results, if any, in each of the companies other than the participating credit institution, specifying whether the right to vote has been exercised in the general meetings of the companies and, in that case, the sense in which it has been exercised.
2. Bodies that, if any, have the competence for the acquisition, disposal and other acts of disposition of business participations.
3. Information on