Circular 1/2020 of the Bank of Spain modifying Circular 1/2013 on the Risk Information Central

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Circular 1/2020, of January 28, of the Bank of Spain, modifying Circular 1/2013, of May 24, of the Bank of Spain, on the Risk Information Central. (BOE of February 5, 2020)

On March 15, Law 5/2019, of March 15, regulating real estate credit contracts, entered into force, which transposes into Spanish law Directive 2014/17/EU of the European Parliament and of the Council, of February 4, 2014, on credit agreements granted to consumers for residential immovable property. The aforementioned law modifies, in its final seventh provision, Law 44/2002, of November 22, on Measures for the Reform of the Financial System, with the aim of granting access to the Risk Information Central (CIR) of the Bank of Spain to all real estate credit lenders. As a result of this modification, the perimeter of reporting entities is expanded to include real estate lenders and credit entities operating under the regime of free provision of services, and real estate credit intermediaries are enabled to have access to reports on the risks of natural and legal persons registered in the CIR under equal conditions as the reporting entities. Regarding information on declared data, the Bank of Spain is authorized to temporarily prevent a reporting entity from accessing CIR data when it fails to comply with its information obligations with the necessary quality and accuracy. Additionally, Royal Decree 309/2019, of April 26, partially developing Law 5/2019, of March 15, regulating real estate credit contracts and adopting other measures in the financial field, in its additional third provision, enables the Bank of Spain to establish technical regulations governing the form of access to the CIR, which must be public, non-discriminatory, and proportionate.

The main objective of this circular is to adapt Circular 1/2013, of May 24, 2013, of the Bank of Spain, on the Risk Information Central and modifying Circular No. 4/2004, of December 22, of the Bank of Spain, on public and reserved financial information standards and financial statement models for credit entities, to the provisions established by Law 5/2019. Additionally, having passed a certain period since the entry into force of Regulation (EU) No. 867/2016 of the European Central Bank, of May 18, on the collection of granular credit and credit risk data (ECB/2016/13) (hereinafter, Regulation (EU) 867/2016), and the modification of Circular 1/2013 to collect through the CIR the information that the Bank of Spain must request from reporting entities to communicate to the European Central Bank in accordance with the aforementioned regulation, it has been considered necessary to introduce some modifications to Circular 1/2013 to improve the coherence of the information collected through the CIR with respect to that established under the framework of Regulation (EU) 867/2016.

Finally, with the aim of updating the regulation, some changes have been introduced in Circular 1/2013 to clarify the information to be sent regarding certain operations, reorganize the way information is presented in some modules, and introduce some additional dimensions. Likewise, some clarifications are introduced regarding the submission of claims to the CIR.

For all the above, this circular fulfills the principles of necessity, effectiveness, proportionality, legal certainty, transparency, and efficiency regulated in Article 129 of Law 39/2015, of October 1, on the common administrative procedure of Public Administrations, since it achieves the pursued ends without imposing unnecessary or accessory burdens, regulating in a coherent manner with the rest of the legal system only the essential aspects.

Consequently, in exercise of the powers granted, the Board of Governors 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 regulation:

Single Provision. Modification of Circular 1/2013, of May 24, of the Bank of Spain, on the Risk Information Central.

The following modifications are introduced in Circular 1/2013, of May 24: [1]

a) In the first provision, on "Reporting Entities", paragraphs 1 and 2 are modified, which are drafted as follows:

"1. The obligation to report to the public service of the CIR extends to the following entities and to real estate lenders (hereinafter, reporting entities):

a) Credit institutions (Official Credit Institute, banks, savings banks, and credit cooperatives), financial credit establishments, and branches in Spain of foreign credit institutions.

b) Mutual guarantee societies and reinsurance societies.

c) Sociedad de Gestión de Activos Procedentes de la Reestructuración Bancaria, SA (Sareb).

d) Bank of Spain.

e) Deposit Guarantee Fund of Credit Institutions.

f) Sociedad Anónima Estatal de Caución Agraria (SAECA).

g) Credit entities operating under the regime of free provision of services.

h) Real estate lenders, referred to in Law 5/2019, of March 15, regulating real estate credit contracts, not included in the previous categories.

2. The obligation collected in paragraph 1 extends, in the case of Spanish entities, to their entire business, including that carried out by their branches abroad, and to instrumental companies integrated into their consolidatable group when they are residents in Spain, and their business, extension of the activity of said group.

Branches in Spain of foreign credit institutions will only report to the CIR the operations of their offices in Spain.

Credit entities operating under the regime of free provision of services will only report to the CIR the operations carried out with residents in Spain.

When reporting entities cannot individually provide all or part of the data that must be reported on operations registered in a branch abroad because it is located in a country whose legislation prevents it, they must send a sworn declaration to the Bank of Spain sufficiently justifying this circumstance, specifically detailing which data is affected by the legal impossibility of transmission to the CIR and the legislation on which it is based, a copy of which will be sent along with the aforementioned sworn declaration. The sworn declaration must be updated at least every two years if the legal impediment to provide data individually persists. If the cause preventing the sending of data ceases, reporting entities must communicate this to the Bank of Spain and, from that moment on, begin to report them individually."

b) In the third provision, on "Titulars and other reportable persons", paragraphs 3, 5, and 6 are modified, which are drafted as follows:

"3. Reporting entities must assign to each titular exclusively the risk, direct or indirect, that corresponds to them in the operations in which they intervene. Consequently:

a) Subsidized operations and those with joint direct risk titulars will be divided and reported to the CIR with as many different operation codes as necessary to assign to each titular, or group of joint titulars acting solidarily among themselves, the amount corresponding to them.

b) Operations with several indirect risk titulars will be reported monthly, as many times as necessary, in module C.2, Dynamic data of indirect risks, to be able to attribute to each titular the amount corresponding to them.

The provisions of this paragraph do not apply to credit entities operating under the regime of free provision of services nor to real estate lenders, whose reporting will adhere to the criteria established for the reporting of module I, Data on the activity of credit entities operating under the regime of free provision of services and real estate lenders."

"5. Risk titulars, direct and indirect, will be reported individually to the CIR, regardless of the amount of their risk in the reporting entity, except when their operations are not reportable, according to what is established in the second provision, paragraph 3. Exceptionally, the effects in which they have committed their signature may be excluded from the reporting of indirect risk in the name of a titular, provided their amount is less than 6,000 euros and they are part of a commercial credit operation with recourse. Likewise, credit entities operating under the regime of free provision of services and real estate lenders will not report to indirect risk titulars who intervene in the operation as a counterparty of a purchased credit derivative, as a guarantor without the knowledge of the titular, or as a third party committed to paying amounts in a financial leasing operation.

The data of titulars, including their operations, whose accumulated risk in the reporting entity is less than 9,000 euros are reported exclusively for the purpose provided in Article 60, fourth paragraph, letter a), of Law 44/2002. For these purposes, the accumulated risk is the amount of operations in which the person intervenes as a risk titular, direct or indirect, with the following clarifications:

a) The amounts of operations declared as: are not included in the calculation of accumulated risk:

1. Financial guarantees instrumented as credit derivatives or credit risk commitments of financial leases for the lessor.
2. Other commitments with credit risk instrumented as credit risk commitments of operational leases for the lessor.
3. Other leases, according to the definition of other leases established in the dimension "Product Type" of module B.2 of Annex 2.

b) The amount of direct risk assumed in operations is the sum of the amounts disbursed (principal, accrued interest and commissions, late interest, and exigible expenses) pending collection plus the available amounts (with immediate and conditional availability).

c) The amount of indirect risk that counts as accumulated risk is the maximum risk guaranteed by the titular of the operations in which they intervene exclusively as a guarantor or because they have committed their signature in commercial portfolio operations or financial effects. When the titular has committed their signature in effects that are part of commercial portfolio operations with recourse that are not reported to the CIR according to what is established in the first paragraph of this paragraph, the risk not reported for this reason will not be counted for these purposes.

d) In syndicated loans and other loans in which several lenders participate jointly, each reporting entity will count as accumulated risk exclusively the amount of risk it assumes from the operations. In the different modules, only the amount of risk the entity assumes in these loans will be reported, without prejudice to the specific treatment for guarantees that they may have, which will be reported according to what is indicated in the eighth provision, paragraphs 3, 8, and 11.

e) In financial guarantees and non-financial sureties and bonds granted solidarily by several entities, each reporting entity will count as accumulated risk the total amount of the operation.

f) In the accumulated risk, in addition to the amounts directly assumed by the reporting entity with the titular, those transferred to third parties from operations in which it maintains management against the titular, even if they have been written off from the asset, as well as those registered in the books of its instrumental companies resident in Spain, will be included.

g) In the accumulated risk of entities that have acquired operations that continue to be reported to the CIR by another entity, the amounts they have assumed in said operations are also included, even if, according to what is established in the fourteenth provision, letter B), they do not report them to the CIR as dynamic data of direct and indirect risks.

The amounts of operations referred to in the second provision, paragraph 1 bis, will not be included in the accumulated risk."

"6. Notwithstanding the above, the Bank of Spain, the Deposit Guarantee Fund of Credit Institutions, the Sociedad Anónima Estatal de Caución Agraria (SAECA), credit entities operating under the regime of free provision of services, and real estate lenders will only report operations whose titulars belong to the institutional sectors households, non-financial societies, or non-profit institutions serving households whose accumulated risk is equal to or greater than 9,000 euros."

c) In the fourth provision, on "Data modules and general provisions", paragraphs 1 and 2 are modified, which are drafted as follows:

"1. Reporting entities are obliged to send the Bank of Spain the following data modules, insofar as they are applicable to them, in accordance with the provisions of this chapter:

The data modules are included as Annex 1, and the instructions for their preparation, in Annex 2. Additionally, the Bank of Spain may develop technical applications to facilitate the preparation of the different modules. In any case, the reporting of the CIR dimensions that coincide with those in Regulation (EU) 867/2016, in what is not expressly contemplated in this circular or in the technical applications, will be done by applying the criteria that, if any, the European Central Bank publishes.

When the day of the maximum deadline for presenting the modules is a holiday in Madrid, the data may be sent on the first business day in that locality after the maximum presentation day.

Dynamic data (that is, those with monthly or quarterly frequency) will be those corresponding to the situation on the last day of the natural month or quarter to which the declaration refers.

Amounts will be reported in units of euros. Amounts denominated in currencies other than the euro will be reported by their equivalent in euros, using for basic data the exchange rate applicable on the date of formalization of the operations and for dynamic data the closing exchange rate corresponding to the date to which the data refer, which will coincide with the rate used for the preparation of financial statements.

2. The following reporting entities will not have to report the modules indicated below, even if they have data susceptible to reporting in them:

a) Spanish credit entities and branches in Spain of foreign credit entities whose registered office is not located in another country of the European Economic Area will not report module I.

b) Branches in Spain of foreign credit entities whose registered office is located in another reporting Member State will not report modules D, H, and I. However, the Bank of Spain may require the sending of modules D and H when the information from these modules is necessary to comply with the obligations established by Regulation (EU) 867/2016. In this case, the information to be sent regarding module D will be the same as that required for branches in Spain of foreign credit entities whose registered office is located in another country of the European Economic Area that is not a reporting Member State. The requirement will be made in writing, with a minimum advance of three months before the first sending.

c) Branches in Spain of foreign credit entities whose registered office is located in another country of the European Economic Area that is not a reporting Member State will not report module D.3, D.5, and I.

d) Mutual guarantee societies will not report modules B.3, C.3, C.4, E, F, G.2, G.3, H, and I.

e) The Bank of Spain, the Deposit Guarantee Fund of Credit Institutions, reinsurance societies, and the Sociedad Anónima Estatal de Caución Agraria (SAECA) will not report modules B.3, C.3, C.4, D, E, F, G, H, and I.

f) Sociedad de Gestión de Activos Procedentes de la Reestructuración Bancaria, SA (Sareb) and financial credit establishments will not report modules B.3, C.3, C.4, H, and I.

g) Credit entities operating under the regime of free provision of services and real estate lenders will not report modules B, C, D, E, F, G, and H."

d) In the fifth provision, on "Data of persons and request for code", paragraph 3 is modified and paragraph 4 is added, which are drafted as follows:

"3. When the reporting entity has knowledge that the reported person has another or other personal identification codes by which they may be declared to the Bank of Spain, it must use the code valid on the date of its declaration. Additionally, it will inform of the previous codes that it may have of that person of which it has documentary knowledge.

4. Credit entities operating under the regime of free provision of services and real estate lenders will not report parts 3 and 4 of this module."

e) In the sixth provision, on "Basic data of operations and relationships with persons", the second paragraph of paragraph 7 is modified, which is drafted as follows:

"If, due to collection management, there is a possibility of having to re-report dynamic data of a cancelled operation, the reporting entity will defer the cancellation of the operation in the CIR until the moment when, according to payment services regulations, such a circumstance is no longer possible. The cancellation of loans with failed amounts registered in which any of the titulars is a legal person and that have been fully transferred without retaining management by the reporting entity, or that have been forgiven or written off due to prescription, will also be deferred. In these cases, the cancellation will be deferred until the end of the quarter in which the transfer, forgiveness, or prescription occurred. In any case, the cancellation of operations may also be deferred whenever the entity considers that there are operational reasons that advise it."

f) The eighth provision, on "Data on received guarantees", is replaced by the following:

"A) Basic data relating operations with received guarantees:

1. Module D.1, Basic data relating operations with received guarantees, will be sent to link the operations declared to the CIR with assets received as collateral and with received financial guarantees, provided that the latter guarantee loans to legal persons. Financial leases will also be linked in this module with assets leased out and reverse repurchase loans with the underlying assets received.

The data of module D.1 will be sent whenever any of the operations cited in the previous paragraph are declared –even if the guarantee is partial–, as well as when any of the previously declared data is modified.

The data relating operations declared to the CIR with received financial guarantees will only be sent by Spanish credit entities and branches in Spain of foreign credit entities whose registered office is not located in another reporting Member State.

2. When an operation is covered by several guarantees, the data of each of them will be reported separately in module D.1.

B) Basic data of received guarantees:

3. Module D.1.1, Basic data of received guarantees, will be sent in the month in which the received guarantees referred to in paragraph 1 of this provision are reported for the first time and with the scope expressed in it.

4. Module D.1.1 has the following parts:

a) Part 1: Data of received guarantees.

b) Part 2: Additional data of received guarantees for loans to legal persons.

5. Received guarantees will be reported in module D.1.1 only once, regardless of whether they serve as guarantee for several operations of the reporting entity.

6. Financial credit establishments, mutual guarantee societies, and Sareb will not report part 2 of this module.

C) Basic data of immovable property received as collateral:

7. Module D.2, Basic data of immovable property received as collateral, will be sent to indicate the characteristics of the immovable property guaranteeing the operations granted by the reporting entity, as well as those leased out in financial leasing.

8. Module D.2 has the following parts, which will be reported depending on the type of asset received as collateral or leased out in financial leasing:

a) Part 1: Data for immovable property.

b) Part 2: Additional data for buildings and building elements.

c) Part 3: Additional data for urban and developable land.

d) Part 4: Additional data for rural properties.

e) Part 5: Data on the value of guarantees.

9. Assets will be reported in module D.2 only once, regardless of whether they serve as guarantee for several operations of the reporting entity.

10. The amounts reported in module D.2 for assets affected by syndicated loans will be those corresponding to the total operation granted to the borrower by all lenders and not the percentage corresponding to the amount financed by the reporting entity, except for the amounts corresponding to mortgage liability, which will be those corresponding to the reporting entity based on the percentage with which it participates in the total amount of the loan.

11. Branches in Spain of credit entities whose registered office is located in another country of the European Economic Area that is not a reporting Member State will not report parts 1, 2, 3, 4, and 5 of this module.

D) Basic data of financial assets received as collateral:

12. Module D.3, Basic data of financial assets received as collateral, will be sent to indicate the characteristics of the financial assets guaranteeing the operations granted by the reporting entity, as well as those temporarily acquired in reverse repurchase loans.

13. Assets will be reported only once in module D.3, regardless of whether they serve as guarantee for several operations of the reporting entity.

14. The amounts reported in module D.3 for assets affected by syndicated loans will be those corresponding to the total operation granted to the borrower by all lenders and not the percentage corresponding to the amount financed by the reporting entity.

E) Dynamic data relating operations with received guarantees:

15. Module D.4, Dynamic data relating operations with received guarantees, will be sent to indicate the amount of the guarantee value attributed to the operation.

16. Module D.4 has two parts, which will be reported depending on the type of opera