Royal Decree-Law 21/2012 on Liquidity Measures for Public Administrations and the Financial Sector

Royal Decree-Law 21/2012, of July 13, on Liquidity Measures for Public Administrations and in the Financial Sector.

Head of State "BOE" No. 168, of July 14, 2012 Reference: BOE-A-2012-9365

INDEX

Preamble................................................................ 3 CHAPTER I. General Provisions............................................... 5 Article 1. Purpose........................................................ 5 Article 2. Adhesion to the Mechanism............................................. 5 Article 3. Principle of Temporality............................................ 5 CHAPTER II. Financial and Fiscal Conditions......................................... 6 Article 4. Financial Conditions............................................. 6 Article 5. Fiscal Conditions................................................ 6 Article 6. Submission of Information on the Adjustment Plan.............................. 7 Article 7. Monitoring of Adjustment Plans..................................... 8 Article 8. Control of Adjustment Plans......................................... 8 CHAPTER III. Autonomous Liquidity Fund.......................................... 8 Article 9. Creation and Validity of the Autonomous Liquidity Fund......................... 8 Article 10. Resources of the Autonomous Liquidity Fund.............................. 9 Article 11. Collection of Resources.......................................... 9 Article 12. Economic-Financial Regime of the Autonomous Liquidity Fund................ 9 Article 13. Management of the Autonomous Liquidity Fund............................... 9 CHAPTER IV. Credit Operations............................................... 10 CONSOLIDATED LEGISLATION Page 1

Article 14. Concluding Credit Operations.................................. 10 Article 15. Retention of Resources from the Financing System of the Autonomous Communities of Common Regime....................................................... 10 Article 16. Payment Agent................................................ 10 Additional Provisions...................................................... 10 First Additional Provision. Adhesions of the Autonomous Communities of the Basque Country and Navarre.. 10 Second Additional Provision. Application to Local Entities of the Autonomous Communities of the Basque Country and Navarre of the financing mechanism for payment to suppliers of local entities.............................................................. 10 Third Additional Provision. Budgets of the Autonomous Liquidity Fund................. 11 Fourth Additional Provision. Negative Settlements 2008 and 2009......................... 11 Fifth Additional Provision. European Financial Assistance for the Recapitalization of Spanish Financial Entities................................................... 11 Transitory Provisions...................................................... 13 Single Transitory Provision. Means of Information Submission.......................... 13 Repealing Provisions..................................................... 13 Single Repealing Provision. Normative Repeals............................... 13 Final Provisions......................................................... 13 First Final Provision. Modification of Law 2/2012, of June 29, on General State Budgets for the Year 2012................................................ 13 Second Final Provision. Competence Titles................................... 15 Third Final Provision. Normative Authorization..................................... 15 Fourth Final Provision. Entry into Force......................................... 15 ANNEX. .................................................................... 16 OFFICIAL STATE GAZETTE CONSOLIDATED LEGISLATION Page 2

CONSOLIDATED TEXT Last modification: December 30, 2014 Repealed rule, with effects from January 1, 2015, by the single repealing provision a) of Royal Decree-Law 17/2014, of December 26. Ref. BOE-A-2014-13613.

STATEMENT OF MOTIVES Organic Law 2/2012, of April 27, on Budgetary Stability and Financial Sustainability, provides in its first additional provision that Autonomous Communities and Local Corporations may request the State to access extraordinary liquidity support measures.

Within the framework of this provision, this royal decree-law creates a liquidity support mechanism for Autonomous Communities, of a temporary and voluntary nature, which allows meeting the debt maturities of the Autonomous Communities, as well as obtaining the necessary resources to finance the indebtedness allowed by budgetary stability regulations.

This additional financing mechanism for Autonomous Communities is designed based on the principles of competence, efficiency, operability, and cooperation among the public administrations involved.

To this end, the relevance of the adjustment plan should be noted as the instrument that concretizes the agreement between the central and autonomous administrations to guarantee compliance with budgetary stability objectives and the financial sustainability of the Autonomous Communities.

The adjustment plan is unique and dynamic over time, as it must adapt to the different commitments acquired by the Autonomous Community and the evolution of its income and expenses. Some Autonomous Communities already have an adjustment plan in force, as a result of having adhered to other liquidity support mechanisms implemented by the State. Therefore, if they also decide to access this new mechanism, they must make the necessary modifications to their adjustment plan to guarantee compliance with the new commitments acquired.

In any case, the adjustment plan and the rest of the plans that the Autonomous Community may have, such as the economic-financial plan, the rebalancing plan, or the economic-financial rebalancing plans in force according to previous legislation on stability, must be coordinated and consistent so as to allow the compatibility and simultaneous achievement of the different objectives.

For adequate monitoring of the plans, periodic obligations for the submission of economic, financial, budgetary, and treasury information are established with the aim of avoiding deviations in the compliance with the content of the adjustment plan. If applicable, the mechanism regulated aims to incentivize decision-making consistent with the achievement of fiscal consolidation objectives and the implementation of corrective measures in the shortest possible time.

Efficiency requires the availability of truthful information on the parameters that condition the compliance with the adjustment plan. In this sense, the internal control body of the Autonomous Community assumes, among other functions, the assessment of the validity and adequacy of the adjustment plan, the provision of information for monitoring and the analysis of risks for the achievement of objectives.

Additionally, the effectiveness of the model is reinforced by the possibility that the Ministry of Finance and Public Administrations proposes the modification of the plan or that the General Comptroller of the State Administration is entrusted with the exercise of control missions in the event that risks of non-compliance or non-compliance with the adjustment plan measures are detected. These actions are configured on the basis of collaboration between the control bodies of the central and autonomous administrations and are oriented to guarantee the achievement of budgetary stability objectives.

Likewise, it is foreseen that, based on the report in which the result of the control mission is recorded, the Minister of Finance and Public Administrations may adopt the corresponding measures in accordance with articles 25 and 26 of the Organic Law on Budgetary Stability and Financial Sustainability.

This royal decree-law consists of sixteen articles, five additional provisions, one transitory provision, one repealing provision, four final provisions, and an annex, and is structured in four chapters. Chapter I (general provisions) determines the purpose, the method of adhesion to the mechanism, and the principle of temporality that governs it.

Chapter II (financial and fiscal conditions) establishes the access requirements to the liquidity mechanism as well as the fiscal and financial conditions that the Autonomous Communities must comply with once they have adhered to it. Among others, it limits the financial instruments that may be used for financing outside the mechanism developed in this royal decree-law, and requires the submission of an adjustment plan whose degree of execution must be reported periodically. This adjustment plan will include a treasury plan and a detail of live debt operations, which will facilitate the monitoring of the liquidity situation of the Autonomous Communities at any given time. Likewise, this chapter determines the information submission obligations of the Autonomous Communities, as well as their monitoring and control by the different responsible bodies.

Chapter III (Autonomous Liquidity Fund) establishes that liquidity will be managed by a fund without legal personality, whose management will be the responsibility of the Official Credit Institute. The resources managed by this Fund will come from the State's financing program. The Fund will be endowed from the General State Budgets through an extraordinary credit amounting to 18,000 million euros.

Chapter IV (credit operations) defines the operations through which the provision of liquidity to the Autonomous Communities will be instrumented, in the form of credits from the Autonomous Liquidity Fund. The financial conditions of these credits will be determined subsequently by Agreement of the Government Delegate Commission for Economic Affairs. The provisions of these credits will be subject to compliance with the financial and fiscal conditions established in Chapter II. On the other hand, the repayment of the credits will be guaranteed by the retention of the resources of the financing system of each Autonomous Community. The Official Credit Institute will act as the payment agent for the operations of the Fund.

The additional provisions include the extension of the financing mechanism for payment to suppliers of local entities to the local entities of the Basque Country and Navarre and approve the budgets of the Autonomous Liquidity Fund. Likewise, the fifth additional provision introduces various measures that are essential to allow the launch of the process of European financial assistance for the recapitalization of Spanish credit entities requiring it, requested on June 25 of the previous year.

Among the final provisions, the first deserves mention, which introduces a modification in Law 2/2012, of June 29, on General State Budgets for the Year 2012, in order to incorporate the regulation of the essential aspects of guarantees for economic obligations derived from the issuance of bonds and obligations of credit entities, the essential requirements and procedures for their granting, and the commissions associated with such guarantees. This modification makes it possible to initiate again and immediately the granting of these guarantees, once the extension of their regime is authorized by a Decision of the European Commission of June 29, 2012, facilitating thus the access of credit entities to the liquidity and financing they need while they can obtain the aforementioned European financial assistance. The remaining three final provisions identify the competence titles under which this royal decree-law is issued, authorize the Ministers of Finance and Public Administrations and of Economy and Competitiveness to issue the necessary norms for the application and development of what is provided in this royal decree-law, and provide for its entry into force the day following its publication in the "Official State Gazette".

The extraordinary situation of urgent financing needs of the Autonomous Communities and their growing problems of access to credit justify the need to urgently launch a mechanism that allows alleviating these needs, meeting the debt maturities of the Autonomous Communities immediately, and avoiding putting their financial sustainability at risk.

In the whole and in each of the measures adopted, the circumstances of extraordinary and urgent need required by article 86 of the Spanish Constitution as enabling prerequisites for the approval of a royal decree-law concur, by their nature and purpose.

In virtue thereof, making use of the authorization contained in article 86 of the Spanish Constitution, on the proposal of the Ministers of Finance and Public Administrations and of Economy and Competitiveness, after deliberation of the Council of Ministers, in its meeting of July 13, 2012,

I ORDER:

CHAPTER I General Provisions

Article 1. Purpose. This royal decree-law aims to create a liquidity support mechanism for Autonomous Communities, of a temporary and voluntary nature, which allows meeting the financial needs of the Autonomous Communities.

For the purposes of this royal decree-law, financial needs shall be understood as the maturities of the public debt of the Autonomous Communities, as provided in article 4.2 of this royal decree-law, as well as the additional amounts necessary to finance indebtedness.

Article 2. Adhesion to the Mechanism.

1. Adhesion to this mechanism will require prior acceptance by the Ministry of Finance and Public Administrations of the request submitted by the Autonomous Community, which will be granted taking into account its financial situation.

2. Once the aforementioned request is accepted, the Autonomous Community will adopt an Agreement of its Government Council or competent body, in which its will to adhere to the mechanism and the commitment to comply with what is established in this royal decree-law and in the Agreements of the Fiscal and Financial Policy Council, of the Government Delegate Commission for Economic Affairs, as well as what is provided in any provision that develops this financing mechanism, shall be recorded.

Adhesion to the mechanism will imply the acceptance of the financial and fiscal conditions provided in the first additional provision of Organic Law 2/2012, of April 27, on Budgetary Stability and Financial Sustainability, and those fixed in this royal decree-law.

Article 3. Principle of Temporality.

1. The request for adhesion to this mechanism must be submitted by the Autonomous Community to the Ministry of Finance and Public Administrations before December 31, 2012, unless the Government Delegate Commission for Economic Affairs decides to extend this deadline.

2. This mechanism will meet the financial needs defined in article 1 as long as difficulties in access of the Autonomous Communities to financial markets persist, with the Government Delegate Commission for Economic Affairs responsible for assessing such circumstance annually.

CHAPTER II Financial and Fiscal Conditions

Article 4. Financial Conditions. Adhesion to this mechanism will entail the acceptance by the Autonomous Community, as well as by its public bodies or entities classified within the Public Administrations sector according to the definition and delimitation of the European System of Accounts, of the following financial conditions:

1. The Autonomous Community will be subject to the principles of financial prudence established by Resolution of the General Secretariat of Treasury and Financial Policy.

2. The liquidity granted with this mechanism must be used to meet: a) maturities corresponding to issued securities; b) maturities of loans granted by European institutions of which Spain is a member; c) those operations that cannot, if applicable, be refinanced or novated by the Autonomous Communities themselves respecting the financial prudence criterion defined by Resolution of the General Secretariat of Treasury and Financial Policy; d) financing needs of the public deficit. e) those financial operations agreed by the Government Delegate Commission for Economic Affairs.

3. Operations instrumented in securities or credit operations abroad cannot be carried out, except with prior express authorization of the General Secretariat of Treasury and Financial Policy without prejudice to the mandatory authorization of the Council of Ministers, in accordance with article 14 of Organic Law 8/1980, of September 22, on Financing of the Autonomous Communities.

4. The financial conditions of all credit operations of the Autonomous Community, both short and long term, that are not subject to authorization according to Organic Law 8/1980, of September 22, on Financing of the Autonomous Communities, and Organic Law 2/2012, of April 27, on Budgetary Stability and Financial Sustainability, must be communicated to the General Secretariat of Treasury and Financial Policy. Such communication must be accompanied by the certificate of the General Comptroller of the Autonomous Community or equivalent unit on compliance with financial conditions.

5. The State, in the name and on behalf of the Autonomous Community, will manage, from the granted credit, the payment of the maturities of the public debt of the Autonomous Community, through the payment agent designated for this purpose.

6. The resources of the financing system of each Autonomous Community of common regime will answer for the obligations contracted with the State on account of the use of the mechanism regulated in this royal decree-law.

7. The Autonomous Community will subscribe the corresponding credit operation with the State under the terms provided in article 14.

Article 5. Fiscal Conditions. Adhesion to this mechanism by an Autonomous Community will entail the acceptance of all the following conditions:

1. Within fifteen natural days from the approval of the agreement provided in article 2, the Autonomous Community must present and agree with the Ministry of Finance and Public Administrations an adjustment plan that ensures compliance with stability and public debt objectives, as well as the reimbursement of the amounts contributed by the Autonomous Liquidity Fund regulated in Chapter III of this royal decree-law.

If the Autonomous Community already had an adjustment plan approved, as a result of access to other additional mechanisms established by the State according to what is provided in the first additional provision of Organic Law 2/2012, of April 27, on Budgetary Stability and Financial Sustainability, modifications necessary for compliance with the new commitments acquired must be agreed with the Ministry of Finance and Public Administrations.

2. Submit to the Ministry of Finance and Public Administrations, through its general comptroller or equivalent unit, as part of the adjustment plan, a treasury plan and detail of live debt operations, according to a standardized model, with the following information: a) Treasury Calendar and Budget containing monthly receipts and payments by headings including the forecast of its minimum monthly treasury. b) Monthly forecast of income. c) Live debt balance. d) Impact of savings measures and revenue measures planned and scheduled calendar of impact on the budget. e) Monthly maturities of short and long-term debt. f) Calendar and amounts of indebtedness needs. g) Evolution of the balance of recognized obligations pending payment both of the current year and previous years. h) Debt maturity profile for the next ten years. i) Any other economic-financial information that the Ministry of Finance and Public Administrations considers necessary.

In the first five business days of each month, the Autonomous Community will send to the Ministry of Finance and Public Administrations the corresponding updates of the information contained in the treasury plan.

3. Allow access and submit to the Ministry of Finance and Public Administrations the information provided in article 6. The sending and capture of this information will be carried out through standardized models or bulk data loading systems.

4. Be subject to supervision by the Ministry of Finance and Public Administrations of the adoption and execution of the measures provided in the adjustment plan according to what is indicated in the following articles.

5. The adjustment plan, which will be unique regardless of the mechanism from which it arises, must be updated at least once a year according to the budget presented by the Autonomous Community.

In any case, if the Autonomous Community has an economic-financial plan or a rebalancing plan in force, the annual update of the adjustment plan will coincide in time with the update of the aforementioned plans, as appropriate, with which it must also maintain the due consistency.

6. The failure to submit, or the unfavorable assessment of the adjustment plan, will lead to the inadmissibility of adhesion to the mechanism. Likewise, the aforementioned situations or the non-compliance with said plan will imply the application of what is provided in paragraph 5 of the first additional provision of Organic Law 2/2012, of April 27, on Budgetary Stability and Financial Sustainability.

Article 6. Submission of Information on the Adjustment Plan.

1. The Autonomous Community will send monthly, through its general comptroller or equivalent unit, to the Ministry of Finance and Public Administrations updated information on the execution of its adjustment plan relating to at least the following elements: a) Monthly budget execution of expenditure and income chapters. b) Adequacy to reality of the adjustment plan and assessment of measures in progress. c) Assessment of short and medium-term risks regarding the achievement of objectives sought with the application of the adjustment plan. In particular, liquidity forecasts and indebtedness needs will be analyzed. d) Analysis of deviations that have occurred in the execution of the adjustment plan. e) Recommendations, if applicable, for modification of the adjustment plan with the obje