Circular 4/2020 of the Bank of Spain on Advertising of Banking Products and Services

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Circular 4/2020, of June 26, of the Bank of Spain, on advertising of banking products and services. (BOE of July 15, 2020)

I

Advertising constitutes a key piece in the framework of the marketing of banking products and services. Generally, it represents the first point of contact between an entity and its potential client. Through advertising, entities make their offer of products and services known, using specialized techniques to incentivize their contracting; therefore, the information transmitted in advertising messages usually has a significant impact on client expectations and the subsequent decision-making process. In this context, the regulation of financial advertising becomes an essential mechanism for the protection of the banking clientele. It is therefore necessary to articulate regulatory and supervisory measures aimed at ensuring that advertising is clear, sufficient, objective, and not misleading, and that client relationships with their entities in the phases subsequent to contracting are less conflictive.

Order EHA/1718/2010, of June 11, on the regulation and control of advertising of banking services and products, repealed the prior authorization regime established in the Order of December 12, 1989, on interest rates and commissions, rules of conduct, information to clients, and advertising of credit institutions, and replaced it with a system of advertising control based on a dual approach: a preventive one, consisting in the elaboration by the Bank of Spain of criteria that promote the clarity, sufficiency, and objectivity of advertising messages, and in the establishment by entities of internal procedures and controls that guarantee their compliance; and a corrective one, which allows for the cessation or rectification of advertising on banking products and services that does not comply with its regulatory framework and the eventual sanctioning of inadequate conduct.

Thus, on the one hand, the control of advertising activity rests, in part, on the entities themselves, through the elaboration of commercial communication policies and the establishment of adequate procedures to protect the legitimate interests of the clientele and manage risks derived from such activity, which include voluntary adherence to advertising self-regulation systems. And, on the other hand, it aims to guarantee the early correction of inadequate conduct.

Through Circular 6/2010, of September 28, to credit institutions and payment institutions, on advertising of banking services and products, the Bank of Spain issued the precise rules for the development and execution of Order EHA/1718/2010, of June 11, exercising the authorization provided for in its final provision first. Said circular addressed both the determination of the general principles and criteria to which advertising must adhere and issues related to the control of advertising activity by entities; in particular, the aforementioned internal procedures and controls.

This system has reinforced discipline in the marketing of banking products and services, through the involvement of the governing bodies of entities, and especially internal control functions, in the development of advertising activity, and has thus contributed to maintaining the quality standards achieved during the previous prior authorization regime. However, after eight years of ex post control of advertising on banking products and services by the Bank of Spain, it is appropriate to review certain aspects of its regulatory framework, in order to adapt it to the evolution of the advertising sector, mainly as a consequence of the impact of digital technology, and to also guarantee more effective supervision of its compliance.

II

This circular consists of nine rules (structured in three chapters), one additional provision, two transitional provisions, one repealing provision, three final provisions, and an annex.

Chapter I, relating to general provisions, introduces some modifications in the scope of application of the rule with respect to the circular it repeals, in order to adapt its content to the changes introduced in the scope of application of the ministerial order subject to development by article one of Order ECE/482/2019, of April 26, by which Order EHA/1718/2010, of June 11, on the regulation and control of advertising of banking services and products, and Order EHA/2899/2011, of October 28, on transparency and client protection of banking services, are modified. These changes respond to various objectives. First, since the scope of application of the order had become obsolete following the transformation carried out in the credit institution sector through the incorporation into the Spanish legal order of various European directives, the typology of entities whose advertising activity is subject to compliance with the sectoral regulations on advertising of banking products and services is clarified. Second, the application of advertising rules of banking activity is extended to lenders and real estate credit intermediaries, with the aim of ensuring that the same activity is governed by the same rules, regardless of who performs it. Finally, regarding rules of conduct whose purpose is to regulate the advertising of products and services capable of generating risks to the patrimony of persons and which, therefore, fall within the scope of public order, it is specified that the subjective scope of application includes both Spanish financial entities and foreign entities that carry out advertising activity on banking products and services in Spanish territory through a branch, agent, or under the regime of free provision of services.

On the other hand, in order to facilitate the interpretation and application of the rule, definitions are introduced and the concept of advertising activity subject to what is provided in Order EHA/1718/2010, of June 11, and in the circular is developed in depth.

Chapter II establishes a series of rules aimed at reinforcing the control of advertising activity. In particular, the general principles and criteria regarding the content and format of the advertising message to which advertising on banking products and services must adhere are determined with greater precision. Likewise, a specific regime is introduced, as a novelty, for advertising issued through audiovisual or radio media and for advertising in digital media and social networks. All of this has been the subject of a profound review and systematization in the annex.

Additionally, the internal procedures and controls required of entities are detailed, and the characteristics and minimum content of the internal register in which they will note and preserve all documentation corresponding to each advertising campaign are specified. Finally, the possibility, provided for in the previous circular, of voluntary adherence by entities to advertising self-regulation systems is maintained as one of the ways to demonstrate that they have controls to guarantee that their advertising complies with what is provided in the regulatory framework of advertising on banking products and services, provided that they make sufficient use of their voluntary prior control tools.

Chapter III regulates the procedure by which the Bank of Spain, in exercise of its supervisory function, provided for in article 50 of Law 10/2014, of June 26, on the ordering, supervision, and solvency of credit institutions, and of the administrative power attributed to it by article 5.1 of Order EHA/1718/2010, of June 11, may require the cessation or rectification of banking advertising that does not comply with what is provided in this circular. All of this without prejudice to the application, when appropriate, of the sanctioning regime provided for in the regulations applicable to entities subject to its scope of application.

In the additional provision, a notification obligation for the start of advertising activity is introduced for those entities that advertise banking products and services in Spanish territory for the first time.

In the first transitional provision, it is provided that the effects of communications of adherence to advertising self-regulation systems sent to the Bank of Spain prior to the entry into force of this circular will remain in effect.

To guarantee legal certainty and, at the same time, ensure that entities have sufficient time to adapt their procedures to the new organizational requirements required regarding advertising registration obligations, in the second transitional provision it is established that, until the entry into force of rule 7, in accordance with what is provided in the final provision third, what is provided in paragraph 4 of rule three and in paragraph 1 of rule four of Circular 6/2010, of September 28, will remain in effect.

In the first final provision, modifications are introduced to Circular 6/2001, of October 29, on holders of foreign currency exchange establishments, with the object of updating and reinforcing the transparency obligations required of establishments that carry out operations of purchase and sale of foreign banknotes or traveler's checks against euros.

In order to ensure a coherent and harmonized interpretation of the rule and to facilitate the adaptation of the internal procedures of entities, in the second final provision it is provided for the elaboration by the Bank of Spain of the technical specifications that the internal register must meet, according to a standardized format.

Likewise, for the reasons indicated, and in order to ensure an orderly transition to the new regulation, in the third final provision two exceptions to the entry into force date of the circular are established. Thus, the registration obligations defined in rule 7 will enter into force six months after the publication by the Bank of Spain of the technical specifications provided for in the second final provision, while the obligation to notify the start of advertising activity collected in the single additional provision will enter into force the day after its publication in the "Boletín Oficial del Estado".

Finally, in the annex, the general principles to which advertising activity on banking products and services must adhere are regulated, and a series of general rules and criteria regarding the minimum content and format of the advertising message are also established, to promote, among other aspects, the balanced and objective nature of advertising.

This circular is issued in the exercise of the regulatory authorization attributed to the Bank of Spain in the final provision first and in articles 4 and 5 of Order EHA/1718/2010, of June 11, and in accordance with the principles established in article 129 of Law 39/2015, of October 1, on the common administrative procedure of Public Administrations.

In particular, the circular complies with the principles of necessity and efficacy, as it is a provision that, essentially, replaces existing regulations in order to improve its content, adapts it to new trends in digital advertising, and reinforces the internal control of risks derived from advertising activity by entities. The principles of proportionality, legal certainty, and efficiency established in the aforementioned law are also addressed, since only those measures and requirements indispensable to effectively comply with the mandate entrusted to the Bank of Spain in Order EHA/1718/2010, of June 11, are provided for. Likewise, the content of the circular being repealed has been rationalized, specified, and systematized, in order to facilitate its knowledge and understanding by its recipients and to contribute to maintaining a stable, predictable, integrated, and clear regulatory framework, which provides an adequate level of protection to the clientele and avoids unnecessary administrative burdens on entities.

Finally, in accordance with what is provided in article 8 of the Resolution of March 28, 2000, of the Board of Directors of the Bank of Spain, approving the Internal Regulations of the Bank of Spain, in application of the principle of transparency, the circular has been submitted to the public consultation, hearing, and information procedures regulated in article 133 of Law 39/2015, of October 1, through access to the documents specific to its processing on the Bank of Spain website, so that potential recipients of the rule and interested parties in general have had the opportunity to manifest their observations during the elaboration procedure.

Consequently, in use of the powers granted, the Board of Directors of the Bank of Spain, on the proposal of the Executive Commission, and in agreement with the Council of State, has approved this circular, which contains the following rules:

CHAPTER I

General Provisions

Rule 1. Object.

The object of this circular is to develop the rules, principles, and criteria to which advertising activity referring to banking products and services, including payment services, other than financial instruments and investment services contemplated in Order EHA/1717/2010, of June 11, on the regulation and control of advertising of investment services and products, must adhere, all of this in accordance with what is provided in Order EHA/1718/2010, of June 11, on the regulation and control of advertising of banking services and products.

Rule 2. Definitions.

For the purposes of what is provided in this circular, the following shall be understood:

a) "Advertising activity": any form of advertising, as defined in article 2 of Law 34/1988, of November 11, General Advertising Law, carried out by entities within the scope of their activity, regardless of the communication media, supports, and advertising formats used for its dissemination, such as, among others, television and cinema (ads, advertorials, sponsored programs, advertising placement, etc.), radio (spots, bursts, micro-programs, etc.), press, all types of outdoor advertising (fixed and mobile billboards, posters, public transport, urban furniture, etc.), advertising through the Internet and mobile devices (banners, buttons, pop-up windows, animated ads, advertising videos, newsletters, advertising in search engines and social networks, text messages, multimedia messages, applications, QR codes, etc.), direct advertising (mailing, personalized letters, email marketing, telemarketing, coupons, etc.), point-of-sale advertising (stands, displays, signs, advertising displays, floor stickers, audiovisual projections, etc.), brochures, catalogs, promotional gifts, loyalty campaigns, sponsorship events, or any other form of commercial communication.

b) "Advertising campaign": set of actions aimed at advertising a banking product or service through a single piece or a series of different advertising pieces, but grouped in time and related to each other, which are disseminated through various media during a specific period.

c) "Commercial communication": any form of transmission of information, verbal or visual, intended to promote, directly or indirectly, through texts, images, and/or sounds, the contracting of banking products and services.

d) "Entities": the entities provided for in rule 4, when carrying out advertising activity on banking products and services.

e) "Group of entities": a group of companies within the meaning of article 42 of the Commercial Code or articles 4, 5, 6, and 7 of Delegated Regulation (EU) No. 241/2014 of the Commission, of January 7, 2014, supplementing Regulation (EU) No. 575/2013 of the European Parliament and of the Council as regards regulatory technical standards for the own funds requirements of institutions, which are linked to each other by a relationship according to article 10.1 or 113.6 or 113.7 of Regulation (EU) No. 575/2013 of the European Parliament and of the Council, of June 26, 2013, on the prudential requirements for credit institutions and investment firms, and amending Regulation (EU) No. 648/2012.

f) "Advertising message": information included in a commercial communication that is directed to attract the attention of the recipient with the objective that they acquire or use a banking product or service.

g) "Advertising piece": specific format (spot, television ad, banner, poster, etc.) through which an advertising message is transmitted depending on the communication medium or advertising support used.

h) "Advertising piece with differential content": specific format, designed within the framework of an advertising campaign to be disseminated through a specific communication medium or advertising support, in which the texts included in the advertising message that may affect the adequate understanding of the characteristics of the offered banking product or service (in particular, the informative data regarding its nature, its cost or profitability, and legal warnings, or their visibility conditions) differ essentially from those of other advertising pieces designed in that same format and for that same campaign (for example, by introducing new conditions or requirements to access the banking product or service or significantly varying the way information is presented). For these purposes, it shall be understood that advertising pieces that are variations of another piece, in which only the offered economic conditions are updated or part of the information is omitted to adapt it to different sizes or duration spaces, do not have the status of advertising piece with differential content, without prejudice to the entity's obligation to ensure that these comply with what is provided in the circular.

i) "Service provider": third party that carries out a process, service, or activity for the entity, or parts of these, within the scope of advertising activity, according to an advertising contract, as regulated in Law 34/1988, of November 11, General Advertising Law, a service provision contract, or an outsourcing agreement.

Rule 3. Objective Scope.

1. Advertising activity, directed to clients or potential clients in Spanish territory, in which banking products or services are offered or information about them is disseminated, is subject to what is provided in this circular.

Advertising activity on banking products and services shall be considered that in which the public's attention is drawn to management services, or other types, provided by entities additionally or in relation to other banking products or services.

2. In accordance with what is provided in article 2.2 of Order EHA/1718/2010, of June 11, the following shall not be considered advertising activity on banking products or services:

a) Campaigns or advertising pieces directed exclusively to disseminate corporate information, such as that related to the situation and management of the entity (organizational structure, fundamental financial and non-financial indicators, corporate social responsibility, etc.) or its corporate purpose, with the purpose of making itself known to the public.

b) Informative contents that are necessary for the contracting of a banking product or service, or for the execution of an operation, such as pre-contractual and contractual information, included in the general or transactional content pages of the entity's website that support the execution of said operations.

c) Information, examples, simulations, or legal warnings regarding the specific characteristics of the concrete operations requested by the user (cost, execution deadlines, etc.) included in the transactional pages of the entity's website that support the execution of said operations.

3. Communications about banking products or services contracted that entities are obliged to provide to their clients within the framework of the contractual relationship, as well as those containing only information relative to their technical or operational functionalities, shall be governed by what is provided in their specific regulations.

Rule 4. Subjective Scope of Application.

1. This circular shall apply to the advertising activity of the following entities:

a) Credit institutions.

b) Electronic money institutions.

c) Payment institutions.

d) Credit finance establishments, including those authorized to operate as hybrid payment institutions or hybrid electronic money institutions.

e) Real estate lenders, real estate credit intermediaries, or designated representatives, as defined in articles 4.2), 4.5), and 4.8) of Law 5/2019, of March 15, regulating real estate credit contracts.

f) The entities indicated in letters a), b), c), and e) above that are authorized in a Member State of the European Union or in a third State, when operating in Spain through a branch, agent, or intermediary established in national territory.

2. The advertising activity of the entities indicated in letters a), b), c), and e) of the previous paragraph that are authorized in a Member State of the European Union, when operating in Spain under the regime of free provision of services, or that are authorized in a third State, when operating in Spain without a branch, shall comply only with what is provided in rules 5, 8, and 9, in the single additional provision, and in the annex of this circular.

CHAPTER II

Control of Advertising

Rule 5. Content and Format of the Advertising Message.

1. Advertising of banking products and services must respect the provisions of this circular, without prejudice to compliance with what is provided in Law 34/1988, of November 11, General Advertising Law; in Law 3/1991, of January 10, on Unfair Competition, and other regulations regulating advertising of general application; in the regulations governing banking products and services that contain specific provisions regarding advertising activity, and in Order EHA/1718/2010, of June 11.

2. When designing advertising campaigns, and each of the advertising pieces that integrate them, entities shall comply with what is provided in the annex. For these purposes, they shall take into account, in any case, the nature and complexity of the offered banking product or service, the characteristics of the dissemination media used, and the target audience to which they are directed.

Rule 6. Commercial Communication Policy. Internal Procedures and Controls.

1. Entities must have a commercial communication policy, in order to guarantee the adequate compliance with what is provided in this circular. Said policy shall expressly include:

a) A description of the advertising activity