Circular 1/2010 of the Bank of Spain on Interest Rate Statistics for Deposits and Loans to Households and Non-Financial Corporations

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Circular 1/2010, of January 27, of the Bank of Spain, to credit institutions, on statistics of the interest rates applied to deposits and loans to households and non-financial corporations. (BOE of February 5)

This Circular modifies the statistics of the interest rates applied to deposits and loans to households and non-financial corporations regulated by Bank of Spain Circular 4/2002, of June 25 (hereinafter, Circular 4/2002). The modification is carried out under the powers delegated to the Bank of Spain by Articles 1 and 2 of the Order of March 31, 1989, so that it can fulfill its functions of elaborating monetary, financial, and economic statistics.

The changes introduced in the interest rate statistics allow the Bank of Spain, in addition to using these statements to elaborate statistics in Spain, to continue employing them to meet the requirement to remit to the European Central Bank statistics on interest rates, the content of which is affected as a consequence of the publication of ECB Regulation (EC) 290/2009, of March 31, amending Regulation (EC) 63/2002 (ECB/2001/18), on statistics of the interest rates that monetary financial institutions apply to deposits and loans to households and non-financial corporations (hereinafter, the Regulation).

In the new Circular, on the one hand, additional information requirements are established for new operations. In this sense, reporting entities are requested to provide data on loans secured by certain assets or guarantees, those granted to self-employed individuals, and those structured as renewable loans and overdrafts and as deferred payment credit card balances. Furthermore, in the classification of loans to non-financial corporations, a greater breakdown is required regarding the amount of operations, the initial interest rate fixing period, and the maturity. On the other hand, the Circular modifies the reporting criteria for renewable loans (including credit lines) and credit card balances.

Instead of modifying Circular 4/2002, the Bank of Spain has opted to publish a consolidated text that fully regulates everything related to the reporting of interest rate statistics.

In the new Circular, as in Circular 4/2002, the Bank of Spain, to minimize the cost to credit institutions of obtaining the statistics, has decided to continue requesting interest rate information exclusively from a sample of entities whose data are considered representative of the population, although it has updated the sample selection criteria.

Reporting entities must remit two statements to the Bank of Spain: one regarding the interest rates of outstanding balances, and another regarding those of new operations carried out in the monthly period to which they refer. The interest rate to be declared for each category of instruments will be the weighted arithmetic mean of their Restricted Effective Definition Rates (TEDR), understood as such the interest rate component of the Annual Equivalent Rate (AER), defined in the eighth rule of Circular 8/1990, of September 7, on transparency of operations and customer protection, that is, excluding from the AER related expenses, such as amortization insurance premiums and commissions that compensate for related direct costs, which, if any, form part of it. Likewise, they must also provide, in the interest rate statement for new operations, the weighted arithmetic mean of the AERs of loans other than overdrafts.

Finally, to facilitate the preparation of the statements, the Circular, in addition to establishing general criteria, fixes those that must be applied to the main operations carried out in our country.

Consequently, in exercise of the powers granted, the Governing Council of the Bank of Spain, upon proposal of the Executive Committee, has approved this Circular, which shall be governed by the following rules:

First Rule.

Definitions.

For the purposes of this Circular, the following shall be understood:

a) "Credit institutions", "households", "non-profit institutions serving households", "non-financial corporations", "self-employed individuals", "residents in Spain and in other States participating in the Economic and Monetary Union", "demand deposits", "deposits with notice", "time deposits", "repurchase agreements" [ 1 ], "housing loans", "consumer credit", "credit for other purposes", "renewable loans [ 1 ] and overdrafts", "deferment payment credit cards", "doubtful", "original term (initial maturity)" and "notice period": concepts identical to those established by Circular 4/2004, of December 22, on public and reserved financial information rules and financial statement models (hereinafter, Circular 4/2004), for the preparation of reserved statements regarding the statistical requirements of the Economic and Monetary Union (hereinafter, EMU statements).

b) "Loans": this term, without any other qualification, has a general and broad meaning, which corresponds exactly to that assigned to loans and credits in EMU statements.

c) "Loans secured by collateral assets or guarantees": loans secured by "credit risk coverage through real guarantees or similar instruments", in accordance with the definition of Article 4, paragraph 1, point 58, and Articles 197 to 200 of Regulation (EU) No 575/2013 of the European Parliament and of the Council, of June 26, 2013, on prudential requirements for credit institutions and investment firms, or guaranteed by "credit risk coverage through personal guarantees", in accordance with the definition of Article 4, paragraph 1, point 59, and Articles 201, 202, and 203 of the aforementioned regulation, provided that the value of the collateral assets or guarantee is equal to or greater than the total amount of the loan. If an entity applies a method other than the "standard method" defined in the aforementioned regulation for supervisory purposes, it may also apply the same treatment to loans included in this detail. [ 1 ]

d) "Initial interest rate fixing period": the period of time at the start of a new operation, as defined in the fourth rule, in which the interest rate does not change, either because it is a fixed interest rate (i.e., an exact value) or because it has been set as a differential with respect to a reference rate at a specific moment.

e) "Renegotiated loans": loans granted and not cancelled that are renegotiated during the month. For the purposes of this Circular, renegotiation implies the active intervention of the household or non-financial corporation in the modification of the contract conditions, including the interest rate. Therefore, restructured loans, as defined in Annex IX of Circular 4/2004, are not per se excluded from renegotiated loans; however, if the restructuring includes a renegotiation of the loan interest rate to a rate lower than the market rate, these shall not be included among renegotiated loans, as they cannot be classified as new operations in accordance with section 2.d) of the fourth rule. [ 1 ]

[1]

Drafted according to Circular 5/2014, of November 28, second rule.

Second Rule.

Scope of application and submission of statements to the Bank of Spain.

1. Spanish credit institutions and branches in Spain of foreign credit institutions that meet the requirements established in the following paragraphs (hereinafter, reporting entities) must submit monthly to the Bank of Spain, within the first fifteen days of the following month (or on the first business day in Madrid after said fifteen-day period if the last day of said period is a holiday in that locality), the information detailed below, in accordance with the models included in the annex of this Circular:

Reporting entities shall be those that on December 31, 2009, have in EMU statement 1, Summary Balance Sheet, a total asset amount equal to or greater than 1,500 million euros, and additionally, in EMU statement 2, Classification by subjects and residence of certain assets and liabilities, have deposits or credits, denominated in euros, towards households (including non-profit institutions serving households) and non-financial corporations resident in Spain or in any of the other States participating in the Economic and Monetary Union, for an amount equal to or greater than 500 million euros. However, the Bank of Spain may require other entities and branches that do not reach the aforementioned amount to submit the aforementioned statements, whenever it deems it necessary for the reported information to reach the required representativeness. In the latter case, the Bank of Spain will communicate in writing to the corresponding entities their obligation to remit the aforementioned statistics, giving them, at minimum, a period of six months from the date of communication to begin submitting the statements.

Reporting entities will continue to submit the aforementioned statements, even if after December 31, 2009, the total assets of EMU statement 1 and the reportable credits and deposits do not reach the thresholds indicated in this section, until the Bank of Spain communicates in writing the period from which they will no longer have to submit them.

Entities and branches that after December 31, 2009, reach the thresholds indicated in this section will not have to submit the aforementioned statements on interest rates until the Bank of Spain communicates in writing, with a minimum advance notice of six months, that they must submit them.

2. The submission of statements to the Bank of Spain must be made via electronic transmission, in accordance with the technical specifications communicated for this purpose. Exceptionally, and only for duly justified causes, the Bank of Spain may authorize their submission on forms that must be dated, stamped, and countersigned on all pages, and signed by one of the persons authorized to electronically sign the information referred to in section 6 of the additional provision first of Bank of Spain Circular 4/2004, of December 22, to credit institutions, on public and reserved financial information rules and financial statement models, or section 7 of the one hundred twenty-first rule of Bank of Spain Circular 3/2008, of May 22, to credit institutions, on determination and control of minimum own funds.

3. The General Directorate of Regulation may develop technical applications to facilitate the preparation of the statements to be submitted to the Bank of Spain.

Third Rule.

Interest rates to be declared in the statements.

1. Statement I.1, Interest Rates of Outstanding Balances, will include, for each category of credit or deposit reflected therein, the weighted arithmetic mean of the interest rates (hereinafter, average interest rate of outstanding balances) of all operations existing at month-end in EMU statements towards households (including non-profit institutions serving households) and non-financial corporations resident in any State participating in the Economic and Monetary Union, except those corresponding to credits classified as doubtful and to credits in normal situation granted for debt restructuring to which rates lower than market rates are applied for similar term and credit risk. The weighting factor will be the corresponding outstanding balance.

Statement I.2, Interest Rates of New Operations, will include, for each category of credit or deposit reflected therein, the weighted arithmetic mean of the interest rates (hereinafter, average interest rate of new operations) applied to all new operations carried out in the reference period -excluding those corresponding to demand deposits or deposits with notice-, even if they do not have an outstanding balance at month-end, towards households (including non-profit institutions serving households) and non-financial corporations resident in any State participating in the Economic and Monetary Union, with the clarifications made for specific operations in the following sixth rule. The weighting factor will be the corresponding amount of new operations, the totals of which will be reflected in the statement.

2. The average interest rate to be declared for each of the categories included in the statements will be the so-called Restricted Effective Definition Rate (hereinafter, TEDR), to be charged or paid by the credit institution, which will be declared in statement I.1 and in statement I.2. Additionally, in statement I.2, the Annual Equivalent Rate (hereinafter, AER) will be declared for the categories indicated therein.

The TEDR will be exclusively the interest rate component of the AER, as defined in the eighth rule of Circular 8/1990, of September 7, on transparency of operations and customer protection. Therefore, the TEDR of an operation will be equal to the annualized interest rate that equates at any date the present value of the net amounts received or to be received, excluding expenses, with that of the amounts delivered or to be delivered, throughout the operation, and will be calculated as the AER excluding related expenses, such as amortization insurance premiums, and commissions that compensate for related direct costs, as defined in section 3 of the thirty-eighth rule of Circular 4/2004.

The AER will be calculated applying the criteria of the eighth rule of Circular 8/1990, of September 7, on transparency of operations and customer protection.

3. In the declaration of the average interest rates of outstanding balances and new operations, the following rules will apply:

a) Rates will be declared with four decimal places. Rounding will be performed to the nearest unit with equidistance upwards.

b) The rates to be considered will be those corresponding to the gross amount of interest to be effectively received or paid by the entity, without taking into account taxes and fiscal advantages attributable to customers.

c) In credits that benefit from interest rate subsidies, the total amount to be received by the entity will be taken, regardless of the amount paid by the client.

d) Average interest rates will be calculated from the interest rates of all operations that must be included in each statement, weighted by the principal or nominal amount of the corresponding credit or deposit, except for discount operations, which will be weighted by the initial net amount.

e) For calculations, it will be considered that the year, even if it is a leap year, has 365 days.

Fourth Rule.

General rules for determining credits and deposits to be included in the calculation of average interest rates of new operations.

1. Operations of a period are considered new, unless one of the circumstances indicated in the following section 2 occurs:

a) All deposits constituted and credits formalized for the first time with customers, except as provided in letter d) below.

b) All renegotiated loans as defined in letter e) of the first rule, as well as all deposits existing in the previous month renegotiated with active intervention of customers in the modification of the conditions of the existing contract, including the interest rate. [ 2 ]

c) All credits in which, as a consequence of a substitution of the debtor, a change of ownership occurs.

d) All outstanding balances of renewable loans, overdrafts, and deferred payment credit cards at the end of the month, even if they had started in previous periods.

2. The following are not considered new operations of a period:

a) Extensions of deposit or credit contracts that occur automatically (i.e., without active intervention of the customer).

b) Variable interest rate operations existing in previous periods in which a variation in interest has occurred as a consequence of an adjustment agreed with the client when contracting the operation.

c) Operations existing in previous periods in which changes from fixed to variable rate, or vice versa, occur, agreed upon at the beginning of the contract.

d) Credits solely by virtue of being classified as doubtful in the period, nor those granted for debt restructuring to which rates lower than market rates are applied for similar term and credit risk.

e) Acquisitions of credits, as well as assumptions of deposits, initiated in previous periods. This operation includes operations incorporated as a consequence of mergers, business acquisitions, asset transfers, and similar transactions with other credit institutions. However, the following will be considered new operations: operations in which the client has the right to renegotiate their financial conditions, non-recourse operations carried out with assignors that are not credit institutions, and "factoring" operations with recourse.

[2]

Drafted according to Circular 5/2014, of November 28, second rule.

Fifth Rule.

General rules for classification by term and amounts.

1. In the classification by term of statement I.1, Interest Rates of Outstanding Balances, all operations will be classified by their original term or notice period following the same rules that govern EMU statements.

2. In the classification by term of statement I.2, Interest Rates of New Operations, time deposits will be classified by their original term, and credits by the initial interest rate fixing period, applying in the latter case the following rules:

a) Contracts with a fixed interest rate throughout their life, including those with a fixed interest rate increasing or decreasing over time, will be classified in the term in which their maturity falls.

b) Contracts with a variable interest rate, i.e., with periodic review of the interest rate, will be included in the term corresponding to the first period of application of the interest rate, regardless of their final maturity.

c) Contracts agreed with a fixed interest rate for a period and a variable rate thereafter will be included in the term during which the fixed interest rate applies.

d) Contracts whose interest rates are subject to constant review (for example, every day) or at the discretion of the reporting entity will be classified by term as "flexible rate".

3. In the classification by amounts in statement I.2, Interest Rates of New Operations, for non-financial corporations, each credit will be considered individually, without aggregating the different contracts formalized with the same holder.

Sixth Rule.

Other rules applicable in specific operations.

In the calculation of the average interest rates of the specific operations indicated below, the following criteria will apply:

a) Operations with employees, even if contracted at more favorable interest rates than the market, will be included in the calculation of average rates.

b) In discount operations, the portion of the difference between the principal or nominal amount and the disbursed net amount corresponding to commissions and expenses will not be included in the calculation of the TEDR.

c) In contracts with a variable interest rate, the TEDR will be obtained considering that the reference interest rate to be used in the calculation will remain constant during the remaining life of the operation.

d) In contracts with a variable interest rate, when several rates have been applied during the month, the TEDR derived from the first reference rate will be reflected in the new operations statement, and in the outstanding balances statement, the reference rate in force at the end of the month.

e) In contracts where the specific value of the interest rate is unknown (for example, because the client can choose between several different reference rates during its life), the TEDR to be declared in the new operations statement will be calculated using the reference rate that implies a lower interest rate, and in the outstanding balances statement, the interest rate in force on the date to which the statement refers.

f) Deposits and loans with a fixed interest rate increasing (or decreasing) over time will be declared as new operations exclusively in the period in which they begin, calculating the TEDR based on the interest contracted for the entire life of the operation, and monthly, in the corresponding outstanding balances statement, using the contracted interest rate that is in force at the end of the corresponding month.

g) Accounts that may present a creditor or debtor balance will be included in the calculation of the average interest rates of demand deposits in statement I.1 if they present a creditor balance at the end of the month, and in the loans and credits of the same statement and in the renewable loans and overdrafts of statement I.2 if they present a debtor balance on that same date. The interest rates to be declared will be those corresponding to them as deposits or as renewable loans and overdrafts, without offsetting between both rates.

h) Tranche-available loans will be declared as new operations in the period in which the contracts are formalized. In statement I.2, the loan amount will be the granted limit, even if the disbursement occurs at a later time. In the outstanding balances statement, the interest rates will be weighted by the amount disbursed at the end of the month.

i) Credit lines will be declared in the new operations and outstanding balances statements by the amounts disbursed at the end of the period to which the statements correspond. Available amounts will not be taken into account either as new operations or as outstanding balances.

j) Global risk policies (multi-purpose) in which the interest rate or the amount of each credit modality is not fixed when contracting the agreement will not be included in the interest rate statements until credits are granted against them. The disbursed amounts will be included as new operations in the periods of disbursement in the corresponding category. In the outstanding balances statement, they will be declared by the amount and interest rate in force at the end of the corresponding month.

k) Credits that have associated interest rate derivatives in the contract itself, such as swaps, caps, or floors, will be declared in the new operations statement by the interest rate applied to customers at the start of the operation; by convention, derivatives associated with said credits will not be included in the calculation of the TEDR. In the outstanding balances statement, these credits will be declared by the interest rate applied to customers at the end of the corresponding month; by convention, the derivatives associated with said credits will not be included in the calculation of the TEDR. [Text cuts off in source]