Circular 5/2014 of the Bank of Spain modifying Circulars 4/2004, 1/2010, and 1/2013 on financial information, interest rates statistics, and the Risk Information Central

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Circular 5/2014, of November 28, of the Bank of Spain, modifying Circular 4/2004, of December 22, to credit institutions, on public and reserved financial information standards and financial statement models, Circular 1/2010, of January 27, to credit institutions, on statistics of interest rates applied to deposits and credits to households and non-financial companies, and Circular 1/2013, of May 24, on the Risk Information Central (BOE of December 23).

This circular modifies Circular 4/2004, of December 22, on public and reserved financial information standards and financial statement models, Circular 1/2010, of January 27, on interest rate statistics applied to deposits and credits to households and non-financial companies, and Circular 1/2013, of May 24, on the Risk Information Central.

The main objectives of the circular are, on the one hand, to incorporate the new statistical and supervisory information requirements that the Bank of Spain must provide to the European Central Bank, and on the other, to adapt the content of public financial information and reserved information to the preparation criteria, terminology, definitions, and formats of the statements known as FINREP in European Union regulations. These latter statements are established as mandatory for consolidated supervisory financial information prepared applying international financial reporting standards adopted by the European Union, or assimilated national accounting standards, in Commission Implementing Regulation (EU) No 680/2014, of April 16, establishing implementing technical standards regarding the communication of information for supervisory purposes by entities, in accordance with Regulation (EU) No 575/2013 of the European Parliament and of the Council.

With the modification of these circulars, certain information that has ceased to be relevant over time is also suppressed, and new information that has gained importance in recent years is requested.

The new financial statements and the modifications made to the data to be declared to the CIR have been designed to facilitate the application of an integral and integrated model, both in the preparation and control, of the financial information, public and reserved, that credit institutions must provide to the Bank of Spain. This model is based on the data point model developed by the European Banking Authority for the modeling of information for supervisory purposes, and allows increasing the quality of the information, while simultaneously reducing the costs of its preparation and management.

Finally, financial credit establishments have been 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 regulations in the matter of supervision and solvency of financial entities. Nevertheless, as established by the royal decree-law itself in the second transitional provision, "until the specific legislation corresponding to them is approved, financial credit establishments will be subject to the legal regime resulting from their application prior to the entry into force of this royal decree-law, maintaining for these purposes their status as credit entities." Therefore, these establishments will continue to temporarily apply what is provided in circulars 4/2004, 1/2010, and 1/2013 before the modifications introduced by this circular.

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

First Regulation.

The following modifications are introduced in Circular 4/2004, of December 22, to credit institutions, on public and reserved financial information standards and financial statement models (hereinafter, Circular 4/2004) [1]:

1. In the first regulation, paragraph 1 is replaced by the following text:

"1. This circular shall apply to the credit institutions listed in Article 1.1 of Law 10/2014, of June 26, on the ordering, supervision, and solvency of credit institutions (hereinafter, Law 10/2014), to the branches of foreign credit institutions operating in Spain, to groups of credit institutions, and to consolidatable groups of credit institutions, as defined in the following paragraphs, in the preparation of their public and reserved financial information.

Groups of credit institutions are all groups whose dominant entity is a credit institution or has as its main activity the holding of participations in one or more credit institutions that are subsidiaries, and those groups that include one or more credit institutions, in which the activity of said entity or entities is the most important within the group.

Consolidatable groups of credit institutions are those groups that must meet the own funds requirements, on a consolidated or sub-consolidated basis, established in Regulation (EU) No 575/2013, of June 26, on prudential requirements for credit institutions and investment firms, and amending Regulation (EU) No 648/2012 [hereinafter, Regulation (EU) No 575/2013]."

2. In the second regulation, paragraph 1 is replaced by the following text:

"1. The credit institutions listed in Article 1.1 of Law 10/2014 shall prepare their annual accounts applying what is provided in this title."

3. In the fourth regulation, in paragraph 1, "other liabilities" replaces "rest of liabilities" in the second paragraph, and the expression "and financial credit establishments will send all statements annually" is suppressed in the third paragraph, and paragraphs 4 and 5 are modified, which are drafted as follows:

"4. The dissemination of individual public information shall be carried out by the Spanish Banking Association, the Spanish Confederation of Savings Banks, or the National Union of Credit Cooperatives, clearly and prominently indicating that the published statements have been prepared applying the Public Financial Information Standards of this circular.

"5. Regardless of what is indicated in the previous paragraphs, credit institutions shall publish, at least for data as of June 30, minimum, qualitative and quantitative information on the mortgage market, relating to financing for construction, real estate promotion, and acquisition of housing, and to assets adjudicated 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 regulation. The quantitative information shall adjust to the models contained in statements PI 6 to PI 11 of Annex I.

This information shall be made public no later than the end of the second month following the one to which the data correspond, through the same channel used to comply with the 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 interim individual financial statements are exempt from this obligation.

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

4. In the fifth regulation, paragraphs 1, 2, and 4 are modified, which are drafted as follows:

"1. Regardless of the obligation to prepare and publish consolidated annual accounts provided by the Commercial Code, all entities that publish such accounts, as well as those that although they do not do so, by adhering to what is provided in paragraph 2 of the third regulation, publish on a consolidated basis the information regulated in Part Eight of Regulation (EU) No 575/2013, shall send to the Bank of Spain, for its publication, the consolidated balance sheets, income statements, statements of recognized income and expenses, total statements of changes in equity, and consolidated cash flow statements adjusted to the models contained in Annex III.

When the entity obliged to prepare consolidated accounts is not a credit institution, the obligation to send the aforementioned information shall fall on the credit institution designated by the Bank of Spain to send the reserved statements of the consolidatable group; when there is only one credit institution in the group, it shall be the one presenting the statements.

Groups of credit institutions shall send the balance sheet, income statement, and statement of recognized income and expenses semi-annually, unless they publish these statements quarterly, in which case they shall send them with this frequency; the total statement of changes in equity and the cash flow statement shall be sent annually."

"2. The dissemination of consolidated public information shall be carried out by the Spanish Banking Association, the Spanish Confederation of Savings Banks, or the National Union of Credit Cooperatives, clearly and prominently indicating that the published statements have been prepared applying the Public Financial Information Standards of this circular."

"4. Regardless of what is indicated in the previous paragraphs, credit institutions shall publish, at least for data as of June 30, minimum, qualitative and quantitative information on financing for construction, real estate promotion, and acquisition of housing carried out by credit institutions and financial credit establishments of the group, and relating to assets adjudicated or received in payment of debts by the group of credit institutions, 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 sixty-first regulation. The quantitative information shall adjust to the models contained in statements PC 6 to PC 10 of Annex III.

This information shall be made public no later than the end of the second month following the one to which the data correspond, through the same channel used to comply with the 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 interim consolidated financial statements are exempt from this obligation.

Additionally, credit institutions shall also send to the Bank of Spain the public statements PC 6 to PC 10 of Annex III semi-annually at the latest on the 11th day of the second month following the one to which the data refer."

5. In the twelfth regulation, paragraph 10 is given new drafting and paragraph 12 is added, with the following text:

"10. Book amount: is the amount at which assets, liabilities, and equity are recognized in the balance sheet."

"12. Gross book amount: is the amount at which assets are recognized in the balance sheet before deducting the amount of accumulated impairment or accumulated changes in fair value due to credit risk."

6. In the twenty-first regulation, in paragraph 16 bis, "other financial assets (or liabilities) at fair value through profit or loss" is replaced by "financial assets (or liabilities) designated at fair value through profit or loss".

7. In the twenty-second regulation, the following changes are made:

a) In paragraph 1, the second and third paragraphs are replaced by the following text:

"Financial assets shall be included, for the purposes of their presentation in the balance sheet according to the type of instrument, in the following items: 'cash, balances with central banks and other demand deposits', 'derivatives', 'equity instruments', 'debt securities', 'loans and advances', and 'changes in fair value of hedged items in a portfolio hedged against interest rate risk'.

Financial liabilities shall be included, for the purposes of their presentation in the balance sheet according to the type of instrument, in the following items: 'derivatives', 'short positions', 'deposits', 'issued debt securities', 'other financial liabilities', 'changes in fair value of hedged items in a portfolio hedged against interest rate risk', and 'redeemable share capital'."

b) In paragraph 3, "Trading portfolio" is replaced by "Financial assets held for trading", "Other financial assets at fair value through profit or loss" is replaced by "Financial assets designated at fair value through profit or loss", "Held-to-maturity investment portfolio" is replaced by "Investments held to maturity", "Credit investments" is replaced by "Loans and receivables", and "Non-current assets held for sale" is replaced by "Non-current assets and disposal groups classified as held for sale".

c) In paragraph 4, "investment to maturity" is replaced by "investments held to maturity".

d) In paragraph 7, "Trading portfolio" is replaced by "Financial liabilities held for trading", "Other financial liabilities at fair value through profit or loss" is replaced by "Financial liabilities designated at fair value through profit or loss", "Financial liabilities at amortized cost" is replaced by "Financial liabilities at amortized cost", and "Liabilities associated with non-current assets held for sale" is replaced by "Liabilities included in disposal groups classified as held for sale".

e) In paragraph 9, the expression "credit investments, and investments to maturity" is replaced by "loans and receivables, and investments held to maturity".

f) In paragraph 12, "investment to maturity" and "investments to maturity" are replaced by "investments held to maturity"; "Valuation adjustments. Available-for-sale financial assets" is replaced by "Other comprehensive income accumulated. Items that may be reclassified to profit or loss. Available-for-sale financial assets"; "credit investments" and "credit investment" are replaced by "loans and receivables", and "trading portfolio" is replaced by "portfolio of financial assets held for trading".

8. In the twenty-fifth regulation, in paragraph 5, "provisions for risks and contingent commitments" is replaced by "provisions for commitments and guarantees granted".

9. In the twenty-seventh regulation, in paragraph 7, "other operating charges" is replaced by "other operating expenses".

10. In the thirty-first regulation, in letter a) of paragraph 6, "held-to-maturity investment portfolio" is replaced by "portfolio of investments held to maturity".

11. In the thirty-second regulation, in letter b) of paragraph 4, the expression '"adjustments to financial assets for macro-hedging', or 'adjustments to financial liabilities for macro-hedging'" is replaced by "Changes in fair value of hedged items in a portfolio hedged against interest rate risk" of asset or liability".

12. In the thirty-fourth regulation, in paragraphs 7, 12, and 14, "gains (losses) on non-current assets held for sale not classified as discontinued operations" is replaced by "gains or (-) losses from non-current assets and disposal groups classified as held for sale not eligible as discontinued activities"; in paragraph 22, "results of discontinued operations (net)" is replaced by "Gains or losses after tax from discontinued activities"; in paragraphs 25 and 27, "Non-current assets held for sale" is replaced by "Non-current assets and disposal groups classified as held for sale", and paragraph 6 is modified, which is drafted as follows:

"6. Non-current assets held for sale, as well as assets that form part of a disposal group, shall be presented separately in the balance sheet in the item 'Non-current assets and disposal groups classified as held for sale', and liabilities that form part of a disposal group shall be presented in the item 'Liabilities included in disposal groups classified as held for sale'. Valuation adjustments to equity related to these items shall be classified, where appropriate, in the item 'Other comprehensive income accumulated. Non-current assets and disposal groups classified as held for sale' corresponding to them depending on whether they can or cannot be reclassified as profit or loss. This presentation criterion shall not be applied retroactively in comparative balance sheets published in annual accounts."

13. In the thirty-fifth regulation, in paragraph 17, "interests and assimilated charges" is replaced by "Interest expenses", "interests or assimilated yields" is replaced by "Interest income", and "provisions for provisions (net)" is replaced by "Provisions or (-) reversal of provisions".

14. In the fortieth regulation, in paragraph 3, "other financial liabilities at fair value through profit or loss" is replaced by "financial liabilities designated at fair value through profit or loss"; in paragraph 8 bis, "liabilities by insurance contracts" is replaced by "Liabilities covered by insurance or reinsurance contracts", "rest of liabilities" is replaced by "Other liabilities", and "provisions for risks and contingent commitments" is replaced by "Provisions for commitments and guarantees granted", and in paragraph 9, "assets by reinsurance" is replaced by "Assets covered by insurance or reinsurance contracts".

15. In the forty-third regulation, in letter d) of paragraph 6, "trading portfolio" is replaced by "held for trading".

16. In the forty-ninth regulation, the last paragraph of paragraph 4 is replaced by the following text:

"Variations in the valuation adjustments of the associated entity, subsequent to the acquisition date, will increase or reduce, as the case may be, the value of the participation. The amount of such variations shall be recognized, through the statement of recognized income and expenses, in the item 'Participation in other recognized income and expenses of investments in joint ventures and associates' corresponding to it depending on whether they can or cannot be reclassified as profit or loss."

17. The fifty-third regulation is given new drafting, which is drafted as follows:

"1. Financial assets shall be presented in the balance sheet grouped, first, within the different categories in which they are classified for the purposes of their management and valuation ('financial assets held for trading', 'financial assets designated at fair value through profit or loss', 'available-for-sale financial assets', 'loans and receivables', and 'investments held to maturity') as defined in paragraph 3 of the twenty-second regulation, unless, as provided in the thirty-fourth regulation, they must be presented as 'non-current assets and disposal groups classified as held for sale', or correspond to 'cash, balances with central banks and other demand deposits', 'derivatives–hedge accounting', 'changes in fair value of hedged items in a portfolio hedged against interest rate risk', or 'investments in subsidiaries, joint ventures, and associates', which shall be shown independently.

Financial assets shall be further broken down, depending on their instrumentation, into the following items:

a) Cash, balances with central banks and other demand deposits: will include coins and banknotes owned by the entity and balances payable on demand deposited in central banks and credit institutions. Cash amounts held by other credit institutions or security companies, for purposes of transport or custody, shall only be included in this item if the deposited funds come directly from the entity, constitute a closed regular deposit, in which the cash object of the deposit is individualized and unavailable to the depositary, and the deposit is cancelled on the first business day following its constitution.

b) Loans and advances: will collect loans (that is, all financing carried out by the entity, including those structured as financial leases, unless they are debt securities) and advances other than loans (that is, financial assets not included in other concepts, such as checks drawn on credit institutions, pending collection balances from clearing houses and organizations for operations in stock exchanges and organized markets, cash deposits given, payable dividends demanded, commissions for financial guarantees pending collection, and debtor balances from transactions that do not originate in banking operations and services, such as rent collection and similar).

These operations shall be detailed depending on the institutional sector to which the debtor belongs in loans and advances to central banks, credit institutions, and customers.

c) Debt securities: includes bonds and other securities that create or recognize a debt for their issuer, including negotiable instruments issued for trading within an open collective of investors, which accrue remuneration consisting of an interest, implicit or explicit, whose rate, fixed or defined by reference to others, is established contractually, or incorporate an implicit derivative with characteristics and economic risks distinct from those of the main contract, and are instrumented in titles or book entries, regardless of the issuing subject.

d) Derivatives: collects the fair value with favorable balance for the entity of derivatives, as defined in paragraph 3 of the twentieth regulation, including implicit derivatives that have been separated from the main contract as indicated in paragraph 16 bis of the twenty-first regulation, which do not form part of hedge accounting. Therefore, this item also includes the fair value of derivatives used in economic hedges that are not hedge accounting, such as, for example, derivatives contracted to hedge the risk of other derivatives.

e) Derivatives–hedge accounting: collects the fair value with favorable balance for the entity of derivatives, as defined in paragraph 3 of the twentieth regulation, including implicit derivatives that have been separated from the main contract, designated as hedging instruments in hedge accounting.

f) Investments in subsidiaries, joint ventures, and