Circular 4/2021 of the Bank of Spain on reserved market conduct, transparency and client protection reporting models and complaint registers

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Circular 4/2021, of November 25, from the Bank of Spain, addressed to credit institutions and other supervised entities, on reserved models regarding market conduct, transparency and client protection, and on the complaint register (BOE of December 1, 2021). [ 1 ]

[1]

Includes error correction published in the BOE of June 2, 2022.

INDEX

Chapter I. General provisions.

Standard 1. Object.

Standard 2. Scope of application.

Chapter II. Models and criteria for the preparation and submission of reserved statements on conduct.

Standard 3. Recognition and valuation criteria.

Standard 4. Segmentation of balances by holders.

Standard 5. Completion and submission of reserved statements on conduct to the Bank of Spain.

Standard 6. Reserved statements on conduct.

Chapter III. Development and internal control of information on conduct.

Standard 7. Development and internal control of information on conduct.

Chapter IV. Complaint register available to the Bank of Spain.

Standard 8. Complaint register available to the Bank of Spain.

Single Additional Provision. Indications, correlations and reconciliations.

Single Repealing Provision.

Single Final Provision. Entry into force.

Annex 1. Reserved statements on conduct.

Annex 2. Minimum content of the complaint register.

I

The conduct of supervised entities and the way in which they relate to their clients are essential elements for the proper functioning of the financial system and for maintaining a viable and sustainable business model in the medium and long term, as reputational considerations have great relevance in this activity.

It is the responsibility of the Bank of Spain to supervise compliance with banking regulation and discipline rules in matters of conduct and informational transparency, as well as to supervise compliance with good banking practices.

In the development of this task, it is necessary to establish a specific framework for reserved information on conduct, which provides adequate and sufficient information for the proper development of this supervisory function, regarding compliance with conduct, transparency and client protection rules. This is especially relevant when considering the innovation process experienced by the market for banking products and services, including payment services, and the evolution of the regulatory framework in this area of transparency and client protection.

This circular establishes the information that supervised entities must prepare regarding conduct, in development –among others– of the authorization contained in the eighth additional provision of Royal Decree 84/2015, of February 13, which develops Law 10/2014, of June 26, on the regulation, supervision and solvency of credit institutions, pursuant to which the Bank of Spain is authorized to require natural or legal persons subject to its supervision, in the form and periodicity determined, the statements and information it deems necessary to fulfill its supervisory function regarding the conduct, transparency and client protection rules applicable. Specifically, the models of reserved statements are determined, for which their content and the periodicity with which they must be sent to the Bank of Spain are defined. Likewise, it is established that entities must have a complaint register available to the Bank of Spain with predefined content.

Taking into account the different types of entities to which the circular is addressed, as well as the differences in their size and the type of clients they serve, a simplified regime for the requirements of reserved statements on conduct has been provided. In this way, the principle of proportionality is incorporated into the regulation.

II

This circular consists of eight standards, one additional provision, one repealing provision and one final provision. Furthermore, the circular includes two annexes. The first establishes the models of reserved statements on conduct that entities must send to the Bank of Spain; the second defines the minimum content of information on complaints that must be available to the Bank of Spain.

Chapter I includes two standards, which refer to general provisions and regulate the object and scope of application of the circular. Regarding the scope of application contemplated in Standard 2, this includes credit institutions; financial credit establishments (including hybrid financial credit establishments); payment institutions (including those with a hybrid nature); entities providing payment services covered by the exemption regime provided for in Article 14.1 of Royal Decree-Law 19/2018, of November 23, on payment services and other urgent measures in financial matters; electronic money institutions (including those with a hybrid nature); entities providing account information services; holders of foreign currency exchange establishments; mortgage lenders; real estate credit intermediaries, and branches in Spain of credit institutions and payment and electronic money entities authorized in a Member State of the European Union or in a third country.

Chapter II, on models and criteria for the preparation and submission of reserved statements on conduct, consists of four standards. The recognition and valuation criteria to be applied in the preparation of the reserved statements will be those established in their specific accounting regulations for each type of entity, except as expressly provided in this circular. Likewise, the models of reserved statements that entities must send to the Bank of Spain and their specifics, in terms of format, frequency and mode of submission, are determined. The statements are structured into three main blocks: i) by product; ii) by commissions and interest income, and iii) by complaints. Additionally, a specific statement referring to the activity of mortgage lenders and real estate credit intermediaries is included.

Chapter III contains one standard on the development and internal control of information on conduct.

Chapter IV consists of a single standard, referring to the complaint register that entities must have available to the Bank of Spain, and includes a description of the minimum content of the register.

The single additional provision collects the possibility that the Bank of Spain communicates the indications, correlations and reconciliations it deems necessary regarding the statements subject to this regulation.

The single repealing provision provides that, from July 1, 2023, paragraph 1 of Standard 12 of Circular 2/2019, of March 29, from the Bank of Spain, on the requirements of the Information Document of Commissions and the Statement of Commissions, and the websites for comparing payment accounts, shall cease to have effect, pursuant to which credit institutions must send to the Bank of Spain, with annual periodicity and during the month of June of each year, information related to the number of basic payment accounts opened, and the requests for opening such basic payment accounts rejected, during the natural year prior to the reporting year. However, in accordance with the entry into force regime of the new circular, it is foreseen that entities will submit the first reserved conduct statements in March 2023, reporting data from the second half of 2022, so, in view of the reporting regime, annual periodicity, provided for in Circular 2/2019, and the semi-annual reporting of the new circular, it is necessary that the reporting obligation regarding basic payment accounts in Circular 2/2019 remains in force until July 2023, to guarantee that the level of supervisory information of the Bank of Spain on basic payment accounts is not undermined, with respect to the first half of 2022.

Finally, the single final provision states that this circular will enter into force 20 days after its publication in the Official State Bulletin. Additionally, it regulates the submission of reserved statements to the Bank of Spain during 2022. It is established that the first reserved statements on conduct to be submitted to the Bank of Spain are those corresponding to the second half of 2022. Additionally, entities will have until December 31, 2022, to complete the complaint register.

III

This circular is issued in the exercise of the regulatory authorizations attributed to the Bank of Spain in matters of conduct, transparency and client protection for all supervised natural and legal persons.

First, Royal Decree 84/2015, of February 13, which develops Law 10/2014, of June 26, on the regulation, supervision and solvency of credit institutions, broadly authorizes the Bank of Spain, in its eighth additional provision, to require natural or legal persons subject to its supervision, in the form and periodicity determined, the statements and information it deems necessary to fulfill its supervisory function regarding the conduct, transparency and client protection rules applicable.

Additionally, the various regulations governing the legal regime of natural and legal persons subject to the supervision of the Bank of Spain contain specific authorizations for the exercise of that general and broad power provided for in the eighth additional provision of Royal Decree 84/2015, cited above. In particular, the following:

– Article 32 of Royal Decree 309/2020, of February 11, on the legal regime of financial credit establishments, which authorizes the Bank of Spain to require information on conduct it deems pertinent from financial credit establishments; and the fourth final provision of the aforementioned royal decree, which authorizes the Bank of Spain to specify and develop through circular what is provided in Article 32.

– Article 30 of Royal Decree 736/2019, of December 20, on the legal regime of payment services and payment institutions, and by which Royal Decree 778/2012, of May 4, on the legal regime of electronic money institutions, and Royal Decree 84/2015, of February 13, which develops Law 10/2014, of June 26, on the regulation, supervision and solvency of credit institutions, are modified, which establishes the obligation for payment institutions to send to the Bank of Spain the statements and information it deems necessary to fulfill its supervisory function regarding the conduct rules applicable to payment institutions.

– The twelfth final provision of Royal Decree-Law 19/2018, of November 23, pursuant to which the Bank of Spain may issue the development provisions necessary to establish the information that payment service providers must communicate to it.

– Article 28 of Royal Decree 778/2012, of May 4, on the legal regime of electronic money institutions, which establishes the obligation for electronic money institutions to send to the Bank of Spain the information on conduct it requires from them; and the third final provision of the aforementioned royal decree, which authorizes the Bank of Spain to develop the information obligations on conduct referred to in Article 28.

– The sixth additional provision of Royal Decree 309/2019, of April 26, which partially develops Law 5/2019, of March 15, regulating real estate credit contracts, which establishes that lenders, credit intermediaries, designated representatives and the consolidable groups of all of them, whose supervision corresponds to the Bank of Spain, must send, in the form and periodicity it requires, the statements and information it deems necessary to fulfill its supervisory function.

– Royal Decree 2660/1998, of December 14, on the exchange of foreign currency in establishments open to the public other than credit institutions, which establishes in its Article 12 that establishments for currency exchange whose holder is a legal person must send to the Bank of Spain the information it requires from them; and the second final provision of the aforementioned royal decree, which authorizes the Bank of Spain to issue the necessary rules for the development of the supervisory and control functions of the activity of currency exchange establishments.

The circular complies with the principles of necessity, efficiency, proportionality, legal certainty, transparency and effectiveness required by Article 129 of Law 39/2015, of October 1, on the common administrative procedure of Public Administrations. In application of the principles of necessity and effectiveness, the regulation responds to the need to have a complete and standardized information framework in matters of market conduct, transparency and client protection of supervised entities, with a greater breakdown of the information available from entities, in order to guarantee the adequate exercise of the supervisory activity of entities. In application of the principle of legal certainty, the new information complements existing requirements with a higher level of detail. The principles of efficiency and proportionality established in the aforementioned law are also addressed, as only those information requirements essential to comply with the supervisory function of the conduct, transparency and client protection rules applicable to said entities by the Bank of Spain are provided. The content of the requested information has been rationalized and specified, recognizing a simplified regime of requirements for reserved statement models for some entities, in order to avoid unnecessary administrative burdens derived from information submission obligations.

The principle of transparency in the preparation of this circular is achieved through prior public consultation with potentially affected persons and entities, fixed by Article 133 of Law 39/2015, of October 1, and through the hearing and public information procedures for interested parties, both procedures being part of the processing process of this circular. Both the prior public consultation and the hearing and public information have been carried out, during the preparation process of this circular, through its publication on the Bank of Spain website, and the opportunity has been given to the recipients of the regulation, competent bodies and interested parties in general to manifest their observations.

Consequently, in exercise of the powers conferred upon it, the Governing Council of the Bank of Spain, upon proposal of the Executive Commission, and in agreement with the Council of State, has approved this circular, which contains the following standards:

CHAPTER I

General Provisions

Standard 1. Object.

This circular aims to fix the content and periodicity of the models of reserved statements on market conduct, transparency and client protection (hereinafter, reserved statements on conduct) that must be sent to the Bank of Spain by the entities mentioned in Standard 2 of this circular. Likewise, the minimum content of information that said entities must have available to the Bank of Spain regarding complaints is determined.

Standard 2. Scope of application.

This circular shall apply to the following types of entities:

a) Credit institutions, excluding the Official Credit Institute.

b) Financial credit establishments, including hybrid financial credit establishments.

c) Payment institutions, including those with a hybrid nature.

d) Entities providing payment services covered by the exemption regime provided for in Article 14.1 of Royal Decree-Law 19/2018, of November 23, on payment services and other urgent measures in financial matters.

e) Electronic money institutions, including those with a hybrid nature.

f) Entities providing account information services.

g) Holders of foreign currency exchange establishments.

h) Mortgage lenders and real estate credit intermediaries subject to the supervision of the Bank of Spain, in accordance with what is provided in Articles 33 and 43 of Law 5/2019, of March 15.

i) Branches in Spain of credit institutions and payment and electronic money entities that are authorized in a Member State of the European Union or in a third country.

Any reference in the circular to "the entity" or "the entities" shall be understood to refer to all the aforementioned types of entities, except in those sections where it is specifically indicated that they are only applicable to some types of entities.

CHAPTER II

Models and criteria for the preparation and submission of reserved statements on conduct

Standard 3. Recognition and valuation criteria.

The accounting criteria, including recognition and valuation rules, for the preparation of reserved statements on conduct shall be those applicable in accordance with the accounting regulations applicable to each entity.

However, entities must include in the commission statements the total amount of commissions settled with clients during the reference period, regardless of their accounting recognition and whether they have been charged or not.

Standard 4. Segmentation of balances by holders.

1. The minimum segmentation scheme in the reserved statements on conduct is as follows. For matters not expressly provided for in this circular and for the purposes of this standard, the criteria regulated in Standard 66 of Circular 4/2017, of November 27, from the Bank of Spain, addressed to credit institutions, on public and reserved financial information rules, and financial statement models, shall apply.

a) Households. Natural persons. Non-business activity. Residents and non-residents: comprises all natural persons included in the Households sector, as regulated in Standard 66 of Circular 4/2017, of November 27, even when they are self-employed individuals, provided they act in a sphere unrelated to their business or professional activity. Unincorporated associations, such as owners' associations, heirs' associations, pending estates and similar, shall be considered included within this category, provided they are predominantly constituted by natural persons and do not carry out a business activity.

b) Households. Self-employed individuals. Residents and non-residents: comprises all natural persons included in the Households sector, as regulated in Standard 66 of Circular 4/2017, of November 27, when they are self-employed individuals, because they carry out business activities personally or businesses through entities without legal personality. Operations shall be reported as self-employed individuals exclusively in the name of the entrepreneurs when their purpose is their business activity.

c) Micro-enterprises. Residents and non-residents: comprises companies included in the non-financial corporations sector, as regulated in Standard 66 of Circular 4/2017, of November 27, which are classified as micro-enterprises in accordance with the definitions of Commission Recommendation 2003/361/EC of May 6, 2003, on the definition of micro-enterprises, small and medium-sized enterprises.

2. In statement CR 1-1, information on all complaints received must be included, as indicated in Annex 1.

Standard 5. Completion and submission of reserved statements on conduct to the Bank of Spain.

i. Completion rules. Entities may not modify the established statement models, nor suppress any of their items, which must always appear, even if they present a null value.

The information referred to in monetary units in the statements shall be presented in euros, unless otherwise indicated in these statements. Rounding shall be performed to the nearest unit, with rounding up in case of equidistance, allowing a maximum rounding to the thousand euros. The completion of each of the cells of the different statements shall be done independently, although the sums of the rounded partials may not coincide with the totals.

The information required in the statements included in this circular corresponds to the activity on an individual basis of "business in Spain", which will include operations that are registered in the books of offices operating in Spain.

ii. Submission rules. The reporting period will coincide with the natural semester. The submission of statements to the Bank of Spain will be carried out within the first five natural days of the third month following the end of the corresponding semi-annual reporting period. When the last day of the deadline to send the statements is a non-working day in Madrid, in the municipality or in the autonomous community where the entity resides, the statements will be sent, at the latest, on the first following working day.

The statements will be sent by the entity to which they refer. However, they may be sent by third parties when justified by organizational reasons of a group of entities, although this will not relieve the persons and governing bodies of the entity to which they refer from responsibility.

The submission of statements to the Bank of Spain must be done through electronic transmission, in accordance with the technical specifications communicated for this purpose.

iii. Special provisions. The Bank of Spain may require entities, generally or specifically, any information it deems necessary as clarification and detail of the previous statements, or for any other purpose arising in the development of its supervisory functions regarding entity conduct, transparency and client protection.

The Bank of Spain may individually require an entity to deliver statements with a frequency higher than that indicated in this circular when necessary for supervisory reasons.

Standard 6. Reserved statements on conduct.

1. Entities must send to the Bank of Spain, in accordance with the criteria indicated in the following subsections, the following reserved statements, in the formats included in Annex 1:

2. Credit institutions and branches in Spain of credit institutions must send to the Bank of Spain statements CP 1-1, CP 2-1, CP 3-1, CP 4, CP 5, CI 1, CI 2, CI 3, CR 1-1 and CR 2-1 included in the table of the previous subsection 1. They must also send statements CP 1-2, CP 1-3, CP 1-4, CP 2-2, CP 2-3, CP 2-4, CP 3-2, CP 3-3, CR 1-2 and CR 2-2 when they exceed the thresholds indicated in subsection 7 following