Resolution of 31 July 2018 by the President of the CNMV publishing the Management Delegation Agreement to the Bank of Spain for support in supervising internal solvency models of investment firms

OFFICIAL STATE GAZETTE No. 188 Saturday, 4 August 2018 Sec. III. Page 78591 III. OTHER REGULATIONS SPANISH NATIONAL SECURITIES MARKET COMMISSION (CNMV) 11227 Resolution of 31 July 2018, by the President of the Spanish National Securities Market Commission (Comisión Nacional del Mercado de Valores), publishing the Agreement delegating management tasks to the Bank of Spain for the performance of support activities in the supervision of internal solvency models of investment firms.

On 31 July 2018, the Agreement delegating management tasks from the Spanish National Securities Market Commission (CNMV) to the Bank of Spain for the performance of support activities in the supervision of internal solvency models of investment firms was signed.

In compliance with the provisions of section 3(a) of Article 11 of Law 40/2015, of 1 October, on the Legal Regime of the Public Sector, this Presidency orders its publication in the "Official State Gazette" (Boletín Oficial del Estado).

Madrid, 31 July 2018.–The President of the Spanish National Securities Market Commission, Sebastián Albella Amigo.

AGREEMENT DELEGATING MANAGEMENT TASKS FROM THE SPANISH NATIONAL SECURITIES MARKET COMMISSION (CNMV) TO THE BANK OF SPAIN FOR THE PERFORMANCE OF SUPPORT ACTIVITIES IN THE SUPERVISION OF INTERNAL SOLVENCY MODELS OF INVESTMENT FIRMS

On the one hand, Mr. Sebastián Albella Amigo, President of the Spanish National Securities Market Commission (CNMV), by virtue of the powers conferred upon him by Article 12.1(j) of the Internal Regulations of the CNMV approved by Resolution of the CNMV Council on 10 July 2003 (BOE 18/7/2003).

On the other hand, Mr. Pablo Hernández de Cos, Governor of the Bank of Spain, by virtue of the powers conferred upon him by Article 36.1(b) of the Internal Regulations of the Bank of Spain, approved by Resolution of the Bank of Spain Government Council of 28 March 2000 (BOE of 6/4/2000).

Both parties mutually recognize each other's legal capacity to enter into this delegation agreement.

STATEMENT OF FACTS

First. In accordance with the provisions of the Securities Market Law, consolidated text approved by Royal Legislative Decree 4/2015, of 23 October (hereinafter LMV), the competencies for the supervision and control of securities markets as well as the persons and entities operating in them, and in particular investment firms (IFs), are legally attributed to the Spanish National Securities Market Commission (CNMV).

For its part, according to the provisions of Law 13/1994, of 1 June, on the Autonomy of the Bank of Spain, this body has been assigned competencies for the supervision and control of credit institutions and their groups, as well as other entities.

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Second. The CNMV has been holding various meetings with managers of international financial groups that have relevant investment firms (IFs) headquartered in London and that, as a consequence of the planned exit of the United Kingdom from the European Union (Brexit), are considering relocating part of their activity to another EU country in order to continue providing their services via the European passport.

Among the elements being evaluated as most prominent, it is considered a prerequisite that supervisory authorities have sufficient capacity to adequately and efficiently supervise the solvency of IFs and authorize the use of internal models for the calculation of own funds, which requires that such authorities have teams and highly qualified technical staff with very specific technical training.

Third. The Bank of Spain has experience in the evaluation and supervision of internal models for the calculation of own funds that Spanish credit institutions have been using since 2008 in accordance with the applicable regulatory framework.

Fourth. As established in Article 242 of the LMV, the Bank of Spain and the CNMV, within their respective legal competencies regarding the control and inspection of financial entities, will cooperate closely with the aim of harmonizing, where appropriate, and improving, based on their mutual experience, the criteria and programs that underpin the techniques and practices of supervision used in the exercise of those competencies.

In this context, to address the imminent potential demand from IFs on matters within the CNMV's responsibility related to internal solvency models within the framework of the authorization and supervision of such entities, this body needs to temporarily rely on the teams of the Bank of Spain, until it establishes a specialized unit in internal models of sufficient size and capacity, with the performance by said teams of the material technical assessment tasks of the models being the object of this management delegation agreement.

This support was formalized in a management delegation agreement on 8 March 2017 (BOE of 13 April). Given that the needs justifying the delegation persist, it is necessary to formalize a new delegation.

This agreement formalizing the management delegation does not prevent the parties from agreeing, in a second phase and once the CNMV has acquired the appropriate additional technical staff, other forms of collaboration regarding the authorization and supervision of internal solvency models of IFs, the responsibility for which lies with the CNMV, which would be formalized through the relevant convention.

Fifth. In accordance with Article 11 of Law 40/2015, of 1 October, on the Legal Regime of the Public Sector (LRJSP), "[t]he performance of material or technical activities of the competence of administrative bodies or Public Law Entities may be delegated to other bodies or Public Law Entities of the same or different Administration, provided that these activities are within their competencies, for reasons of efficiency or when the appropriate technical means for their performance are not possessed."

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For the reasons stated above, this delegation is carried out in accordance with the provisions of the aforementioned article, for reasons of efficiency, given the specialization of the Bank of Spain in the valuation of internal solvency models and on a temporary basis until the CNMV has its own qualified staff, taking into account the general principles of collaboration and cooperation that must govern the actions of Public Administrations.

Therefore, both parties agree to sign this agreement formalizing the management delegation, according to the following clauses:

First. Object. The Bank of Spain, through its specialized teams in internal models, will support the CNMV in the supervisory tasks it must develop regarding the internal models that IFs intend to use or use for the calculation of their own funds, performing technical or material tasks of analysis and evaluation.

Second. Exercise of the delegated tasks.

1. The CNMV will inform the Bank of Spain with sufficient advance notice of the needs for review of the internal models of IFs presented to it, so that the Bank of Spain can adequately plan the execution of the tasks provided for in this agreement. Such request must contain the expected start of the review, the intended scope of the tasks to be performed, and the expected deadline for delivery of the technical document recording the result of the valuation in each case.
2. Depending on the number of models to be reviewed and the availability of resources by the Bank of Spain, the latter may establish an order of priorities and deadlines for the received requests, a matter that will be communicated to the CNMV.
3. The Bank of Spain will designate one or more of its employees to form part of a working team responsible for carrying out the delegated tasks.
4. Once the analysis and evaluation tasks are concluded, the Bank of Spain will send to the CNMV a technical document containing its conclusions, including, if applicable, the main weaknesses detected, which will serve as support for the CNMV to exercise its own competencies for analysis and valuation in the context of the authorization and supervision procedures for the corresponding internal models.
5. In the event that "on-site" inspections or remote reviews are carried out, the direction and execution thereof, as well as relations with the entity, will in all cases correspond to the CNMV, as the holder of the competence, without prejudice to the Bank of Spain participating in such inspections or reviews together with the person or persons designated by the CNMV.
6. The Bank of Spain, if so requested by the CNMV, must make available to it all information it has had at its disposal in the development of its material or technical tasks of analysis and evaluation of internal models of IFs, and may request from the CNMV the clarifications it deems appropriate to adequately fulfill the delegated tasks. Communications between both authorities must be carried out with the greatest possible speed and guaranteeing due confidentiality.
7. The submission of applications and documents related to internal models by the corresponding IFs shall take place through the CNMV, which will be the entity maintaining the relationship with them. Nevertheless, if necessary or convenient, there may be informal direct contacts or meetings of managers of IFs with the teams of the Bank of Spain developing the material or technical tasks of analysis and evaluation, although in such meetings the General Directorate of Entities of the CNMV will participate.
8. The Bank of Spain will keep the CNMV informed, through the General Directorate of Entities, of the characteristics and progress occurring in its tasks of analysis and evaluation of internal models of IFs. The General Directorate of

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OFFICIAL STATE GAZETTE No. 188 Saturday, 4 August 2018 Sec. III. Page 78594 Entities of the CNMV may request the Bank of Spain to hold joint internal meetings of their respective teams, whenever it deems it necessary for the better performance of its authorization and supervision functions.

Third. Holder of the Competence. In accordance with section 2 of Article 11 of the LRJSP, the management delegation does not involve the transfer of ownership of the supervision competencies, nor of the substantive elements of their exercise, attributed to the CNMV.

It corresponds to the CNMV to issue the final or procedural acts or resolutions that support or integrate the specific material activity object of this management delegation. The CNMV will also be responsible for the ordinary monitoring of actions carried out on approved internal models.

Fourth. Joint Decision. In the event that the decision on the evaluation of the model must be taken jointly with other competent authorities, the CNMV will be responsible for coordinating the decision and the distribution of review tasks with the affected competent authorities. In this case, the Bank of Spain will execute only those technical or material tasks that, within the object of this delegation, are attributed to it by the CNMV.

Fifth. Information Security and Processing of Personal Data.

1. During the performance of the work, the Bank of Spain will have the status of data processor for the personal data to which it might have access in execution of the management delegation. The Bank of Spain commits to compliance with all obligations derived from the status of data processor regarding the same, in accordance with the provisions of Organic Law 15/1999, of 13 December, on the Protection of Personal Data.
2. In the execution of this management delegation, the Bank of Spain and the CNMV will be subject to the confidentiality obligations provided for in their respective legal regimes.
3. All information or documentation supporting the work that has been sent to the Bank of Spain by the CNMV or by the IFs through the CNMV, will be returned to said body once the work provided for in this delegation is concluded.

Sixth. Development and Monitoring of the Agreement. The CNMV will designate a person responsible for directing, coordinating, carrying out interlocution, and checking the correct execution of this delegation. The Bank of Spain will take charge of the material and technical development of the delegated tasks, which will correspond within it to the current Inspection Department IV of the General Directorate of Supervision. The Bank of Spain will also appoint a person responsible for the coordination of the delegated work and for interlocution with the CNMV.

Seventh. Validity. This delegation will enter into force the day following its publication in the "Official State Gazette" (BOE) and will have effect for a period of one year from that date.

If the needs justifying it persist, the delegation may be extended for successive periods of one year, through the corresponding addendum, without the total duration, including extensions, exceeding three years in any case.

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OFFICIAL STATE GAZETTE No. 188 Saturday, 4 August 2018 Sec. III. Page 78595

Eighth. Publication. This agreement will be published in the "Official State Gazette" (Boletín Oficial del Estado), in accordance with the provisions of Article 11.3 of Law 40/2015, of 1 October.

And in proof of conformity, the President of the Spanish National Securities Market Commission and the Governor of the Bank of Spain sign this instrument formalizing the management delegation.

Madrid, 31 July 2018.–The President of the Spanish National Securities Market Commission, Sebastián Albella Amigo.–The Governor of the Bank of Spain, Pablo Hernández de Cos.

cve: BOE-A-2018-11227 Verifiable at http://www.boe.es http://www.boe.es OFFICIAL STATE GAZETTE D. L.: M-1/1958 - ISSN: 0212-033X