Circular 4/2015 of the Bank of Spain, of July 29, amending Circulars 4/2004, 1/2013, and 5/2012

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Circular 4/2015, of July 29, of the Bank of Spain, amending Circular 4/2004, of December 22, to credit institutions, on rules for public and reserved financial information and models for financial statements, Circular 1/2013, of May 24, on the Risk Information Central, and Circular 5/2012, of June 27, to credit institutions and payment service providers, on transparency of banking services and responsibility in granting loans. (BOE of August 13)

The approval of Royal Decree-Law 20/2012, of July 13, on measures to guarantee budgetary stability and promote competitiveness; of Law 14/2013, of September 27, on support for entrepreneurs and their internationalization; and of Royal Decree 579/2014, of July 4, which develops certain aspects of this law regarding territorial cedulas and internationalization bonds (hereinafter, the Royal Decree), has resulted in the introduction of these negotiable instruments into our debt instrument market.

The Royal Decree attributes technical competencies to the Bank of Spain on certain aspects, to the exercise of which this circular is directed. In this regard, Circular 4/2004, of December 22, to credit institutions, on rules for public and reserved financial information, and models for financial statements, is amended to establish the minimum content of the special accounting register referred to in Article 10 of the aforementioned Royal Decree for these securities, as well as the information that must be published and incorporated into the notes to the annual accounts of the issuing entity, pursuant to the authorization established in paragraphs 2 to 4 of the aforementioned Article.

With the same scope, and pursuant to the authorization established in the single additional provision of the Royal Decree in relation to territorial cedulas, the minimum content of the special accounting register for these securities is established, as well as the data that must be published and included in the notes to the annual accounts of the issuing entity.

Financial credit establishments were excluded from the definition of credit institutions by Royal Decree-Law 14/2013, of November 29, on urgent measures to adapt Spanish law to European Union legislation on the supervision and solvency of financial entities. The recent Law 5/2015, of April 27, on the promotion of business financing, has regulated their new legal status, which must be subject to further regulatory development, and has established the regime applicable to credit institutions as the supplementary applicable regime. In particular, until the aforementioned specific regulatory development is completed for the submission of accounting information, a transitional application of the credit institution regime for this purpose, contained in Circular 4/2004, has been foreseen. Without prejudice to the foregoing, and to the extent that they may issue territorial cedulas, or cedulas and internationalization bonds, the same requirements as those provided for credit institutions in this regard will apply to them.

Likewise, Circular 1/2013, of May 24, on the Risk Information Central (CIR), is amended to incorporate the financing of the internationalization of companies among the purposes of operations.

The amendment of Circular 4/2004 has also been used to correct certain errors that had been detected in it.

Finally, Circular 5/2012, of June 27, to credit institutions and payment service providers, on transparency of banking services and responsibility in granting loans, is also amended regarding the definition and method of calculation of the official reference rate of the mortgage market "Average rate of mortgage loans between one and five years, for the purchase of free housing, granted by credit institutions in the euro zone".

Consequently, in exercise of the powers granted, the Governing Council of the Bank of Spain, upon proposal of the Executive Committee, has approved this circular, which contains the following rules:

First Rule.

Amendment of Bank of Spain Circular 4/2004, of December 22.

The following modifications are introduced into Circular 4/2004, of December 22, to credit institutions, on rules for public and reserved financial information, and models for financial statements (hereinafter, Circular 4/2004):

1. In the fourth rule, paragraph 5 is amended, which shall read as follows:

«5. Without prejudice to what is stated in the previous paragraphs, credit institutions shall publish, at least for data as of June 30, at minimum, qualitative and quantitative information on the mortgage market, regarding financing for construction, real estate development, and housing acquisition, and on assets assigned or received in payment of debts, corresponding to business in Spain, as well as information on refinancing and restructuring, the distribution of loans to customers by activity, and the concentration of exposures by activity and geographic area, regulated in the sixtieth rule. The quantitative information shall comply with the models contained in statements PI.6 to PI.11 of Annex I. They shall also publish, at least for data as of December 31, information regarding internationalization cedulas and bonds and territorial cedulas, complying with the models contained in statements PI.12 and PI.13 of Annex I.

This information shall be made public no later than the end of the second month following the month to which the data correspond, through the same channel used to comply with information obligations regulated in Part Eight of Regulation (EU) No. 575/2013 or on their website.

Credit institutions that include the information required in this paragraph in their individual interim financial statements are exempt from this obligation.

Additionally, credit institutions and branches of foreign credit institutions shall send the Bank of Spain statements PI.6 to PI.11, and statements PI.12 and PI.13 of Annex I, semi-annually and annually, respectively, no later than the end of the month following the one to which the data refer.»

2. In the sixtieth rule:

2.1 Following paragraph 33 ter, section D.14) is added, with the following text:

«D.14) Breakdown of customer deposits.

33 quater. Customer deposits shall be broken down according to how they are structured into: demand deposits, with details of current and savings accounts and other demand deposits; term deposits, with details of fixed-term deposits, non-negotiable issued cedulas and bonds, hybrid deposits, and other term deposits; deposits available with notice, and repurchase agreements.»

2.2 The title of section S.5) is replaced by:

«S.5) Special accounting register referred to in Article 21 of Royal Decree 716/2009, of April 24.

S.5.1) Information to be published by issuing entities of cedulas or mortgage bonds.»

2.3 The title of section S.6) is replaced by:

«S.5.2) Explicit statement by the Board of Directors or equivalent body.»

2.4 The current section S.7) becomes S.8), and paragraph 73 bis becomes 73 septies.

2.5 Two new sections, S.6) and S.7), are added, with the following text:

«S.6) Special accounting register of internationalization cedulas and bonds referred to in Article 10 of Royal Decree 579/2014, of July 4.

S.6.1) Information to be published by issuing entities of internationalization cedulas.

73 bis. Issuing entities of internationalization cedulas shall include the following information in the notes, extracted from the data of the special accounting register regulated in Annex XI of this circular, in accordance with Article 34 of Law 14/2013, of September 27, on support for entrepreneurs and their internationalization (hereinafter, Law 14/2013), and Article 10 of Royal Decree 579/2014, of July 4, which develops certain aspects of Law 14/2013 (hereinafter, Royal Decree 579/2014):

A) Active operations:

a) The aggregate outstanding nominal value of all loans that serve as the basis for calculating the issuance limit of internationalization cedulas issued by the entity, obtained as the difference between the aggregate outstanding nominal value of all eligible loans pursuant to Article 34.6 of Law 14/2013 minus the outstanding nominal value of loans affected by internationalization bonds and the eligible loans in default that must be deducted pursuant to Article 13 of the aforementioned Royal Decree.

b) The aggregate nominal value of substitution assets affected by each issuance of internationalization cedulas and their breakdown by nature.

B) Passive operations:

a) The aggregate nominal values of internationalization cedulas issued by the entity pending amortization, even if not recorded in the liabilities (because they have not been placed with third parties or have been repurchased), with distinction, where applicable, between those issued through public offering and other issuances, specifying, for each of these classes, their residual maturity according to the following categories: up to one year, more than one year and up to two years, more than two years and up to three years, more than three years and up to five years, more than five years and up to ten years, and more than ten years.

b) The aggregate nominal values of internationalization cedulas of each class issued by the entity and held by the issuing entity itself.

c) The percentage resulting from the quotient between the nominal value of internationalization cedulas issued and not yet matured, even if not recognized in the liabilities, and the outstanding nominal value of loans affected as collateral, calculated in accordance with Article 13 of Royal Decree 579/2014.

The breakdown and presentation of the quantitative information to be published in the notes pursuant to this section shall be carried out in accordance with the format of statement PI.12, Information on internationalization cedulas and bonds, of Annex I, insofar as this information is concerned.

S.6.2) Information to be published by issuing entities of internationalization bonds.

73 ter. Issuing entities of internationalization bonds shall include the following information in the notes for each of their internationalization bond issuances, extracted from the special accounting register regulated in Annex XI of this circular, in accordance with Article 34 of Law 14/2013 and Article 10 of Royal Decree 579/2014:

A) Active operations:

a) The aggregate amount of the outstanding nominal value and the present value, calculated in accordance with Article 12 of Royal Decree 579/2014, of all loans covering each issuance of internationalization bonds, with the breakdown of the outstanding nominal value of all loans affected as collateral, including those in default that, pursuant to the aforementioned Article 12, must be deducted for the purpose of calculating the limit of each issuance.

b) The nominal value of all substitution assets affected by each issuance of internationalization bonds and their breakdown by nature.

B) Passive operations:

a) The aggregate nominal values of internationalization bonds issued by the entity pending amortization of each issuance, even if not recorded in the liabilities (because they have not been placed with third parties or have been repurchased), with distinction, where applicable, between those issued through public offering and other issuances. Furthermore, the maturity date and the present value, calculated in accordance with Article 12 of Royal Decree 579/2014, of each internationalization bond shall be indicated.

b) The aggregate nominal values of internationalization bonds issued by the entity and held by the issuing entity itself, for each of the issuances made.

c) The percentage resulting from the quotient between the present value of each issued and not yet matured internationalization bond issuance of the entity and the present value of loans affected as collateral for each issuance, calculated in accordance with Article 12 of Royal Decree 579/2014.

The breakdown and presentation of the quantitative information to be published in the notes pursuant to this section shall be carried out in accordance with the format of statement PI.12, Information on internationalization cedulas and bonds, of Annex I, insofar as this information is concerned.

S.6.3) Explicit statement by the Board of Directors or equivalent body.

73 quater. In the note to the accounts including the data on internationalization cedulas and bonds, there shall be included, pursuant to Article 10.5 of Royal Decree 579/2014, an explicit statement by the Board of Directors or equivalent body of the entity, regarding the existence of explicit policies and procedures related to their activities of financing contracts for the export of goods and services or processes of company internationalization, and by which said body takes responsibility for compliance with the applicable regulations for the issuance of these securities.

S.7) Special accounting register of territorial cedulas referred to in the single additional provision of Royal Decree 579/2014, of July 4.

S.7.1) Information to be published by issuing entities of territorial cedulas.

73 quinquies. Issuing entities of territorial cedulas shall include the following information in the notes, extracted from the special accounting register established in Annex XII of this circular, in accordance with Article 13 of Law 44/2002, of November 22, on measures to reform the financial system (hereinafter, Law 44/2002), and the single additional provision of Royal Decree 579/2014:

A) Active operations:

The aggregate outstanding nominal value of all loans granted by the entity that serve as the basis for covering territorial cedulas, broken down by sector and residence of the counterparty.

B) Passive operations:

a) The aggregate nominal values of territorial cedulas issued by the entity pending amortization, even if not recorded in the liabilities (because they have not been placed with third parties or have been repurchased), with distinction between those issued through public offering and other issuances, specifying, for each of these classes, their residual maturity according to the following categories: up to one year, more than one year and up to two years, more than two years and up to three years, more than three years and up to five years, more than five years and up to ten years, and more than ten years.

b) The aggregate nominal values of territorial cedulas of each class issued by the entity and held by the issuing entity itself.

c) The percentage resulting from the quotient between the total nominal value of territorial cedulas issued and not yet matured, even if not recognized in the liabilities, and the outstanding nominal value of loans serving as collateral, calculated in accordance with paragraph three of Article 13 of Law 44/2002.

The breakdown and presentation of the quantitative information to be published in the notes pursuant to this section shall be carried out in accordance with the format of statement PI.13, Information on territorial cedulas, of Annex I, insofar as this information is concerned.

S.7.2) Explicit statement by the Board of Directors or equivalent body.

73 sexies. In the note to the accounts including the data on territorial cedulas, there shall be included, pursuant to paragraph 3 of the single additional provision of Royal Decree 579/2014, an explicit statement by the Board of Directors or equivalent body of the entity, regarding the existence of explicit policies and procedures related to their activities of financing public entities, and by which said body takes responsibility for compliance with the applicable regulations for the issuance of these securities.»

3. In the seventy-second rule, paragraphs 15 and 16 are added, with the following text:

«15. Entities issuing cedulas or internationalization bonds shall maintain a special accounting register of internationalization cedulas and bonds in which all loans serving as collateral for the issuances, immobilized substitution assets to cover them, and financial derivatives linked to each issuance are recorded, with the data requested for them in Annex XI of this circular, so that they can be made available to the Bank of Spain when requested. The data must be available for up to six years after the economic cancellation of the operations.

Pursuant to Article 10 of Royal Decree 579/2014, this special accounting register shall be updated continuously and shall consist of two differentiated parts: the first for internationalization cedulas, and the second for internationalization bonds. In turn, the second part shall consist of as many subdivisions as live internationalization bond issuances the entity has.

The General Directorate of Financial Stability and Resolution may issue a technical application to homogenize the information that must be included in the special registers referred to in the previous paragraph.

16. Entities issuing territorial cedulas shall maintain sufficient and adequate records to collect all loans linked to these securities, with the data requested for them in Annex XII of this circular, so that they can be made available to the Bank of Spain when requested. The data must be available for up to six years after the economic cancellation of the operations.

The General Directorate of Financial Stability and Resolution may issue a technical application to homogenize the information that must be included in the special registers referred to in the previous paragraph.»

4. In Annex I, statements PI.12 and PI.13 are added, with the format included in the annex of this circular.

5. The following modifications are made in Annex VII:

5.1 In statement UEM.11, the following modifications are made:

– The column "Of which: residents in the rest of the world" is renamed "Of which: MFI residents in other Member States of the EMU."

– Note (b) is replaced by the following text:

«(b) These columns collect the net flows of all loans securitized or otherwise transferred (including those sold outright) by the entity during the month to which the statement refers, even if they have been retained entirely on the balance sheet (calculated as the amount of loans transferred minus the amount of loans acquired in the period, valued both applying the criteria for preparing UEM statements, i.e., by the outstanding principal). However, transfers or acquisitions from other monetary financial institutions (MFIs) resident in Spain shall be excluded, as shall loans whose transfer results from a merger, absorption, or spin-off involving the reporting entity. These columns do not collect flows arising after the transfer of the loans.»

5.2 In statement UEM.12, the column "Of which: residents in the rest of the world" is renamed "Of which: MFI residents in other Member States of the EMU".

6. Annexes XI and XII are added, which are included in the annex of this circular.

Second Rule.

Amendment of Bank of Spain Circular 1/2013, of May 24.

The following modification is introduced into Circular 1/2013, of May 24, on the Risk Information Central:

In module B.2, Basic Data of Operations, of Annex 2:

– In Part 1, in the dimension "Purpose of the Operation", in letter b), the value "Financing of the internationalization of companies" is added before the value "Other purposes".

Third Rule.

Amendment of Bank of Spain Circular 5/2012, of June 27.

The following modification is introduced into Circular 5/2012, of June 27, to credit institutions and payment service providers, on transparency of banking services and responsibility in granting loans:

– Paragraph 2 of Annex 8 is drafted as follows:

«2. Average rate of mortgage loans between one and five years, for the purchase of free housing, granted by credit institutions in the euro zone.

It is defined as the volume-weighted arithmetic mean of the interest rates applied to new mortgage loan or credit operations in which an initial interest rate fixation period of between one and five years is foreseen, carried out in euros with households resident in the euro zone during the reference month, which shall be the second month prior to that in which the publication of said value takes place.

This average shall be the one calculated by the European Central Bank in accordance with Regulation (EC) No. 63/2002 of the European Central Bank, of December 20, 2001, on the statistics on interest rates applied by monetary financial institutions to deposits and loans vis-à-vis households and non-financial corporations, published by the European Central Bank on its website or, in the absence of such publication, in any electronic or physical medium through which it disseminates such information.

The index published in the Bank of Spain Resolution shall not be corrected even if the European Central Bank subsequently modifies the rate it initially published.»

Additional Provision.

Financial credit establishments, when issuing territorial cedulas, or cedulas or internationalization bonds, shall maintain the corresponding special accounting register and shall be subject to the information obligations established for credit institutions by Bank of Spain Circular 4/2004.

Final Provision. Entry into Force.

1. The modifications introduced by this circular into Circular 4/2004 shall enter into force on December 31, 2015, with the following exceptions:

– The first statements PI.12 and PI.13 to be sent to the Bank of Spain shall correspond to data as of December 31, 2016.

– The modifications made in Annex VII shall enter into force the day following the publication of this circular in the Official State Gazette.

2. The modifications introduced by this circular into Circular 1/2013 shall enter into force on December 31, 2015.

3. The modifications introduced by this circular into Circular 5/2012 shall enter into force the day following the publication of this circular in the Official State Gazette.

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