Law 26/2013 of 27 December on Savings Banks and Banking Foundations (Correction of Errors)

OFFICIAL STATE BULLETIN
No. 311 Saturday, December 28, 2013 Sec. I. Page 105878
I. GENERAL PROVISIONS
HEAD OF STATE
13723 Law 26/2013, of December 27, on Savings Banks and Banking Foundations. (Correction of Errors) JUAN CARLOS I KING OF SPAIN To all who shall see and understand this.
Know ye: That the General Courts have approved and I have come to sanction the following law:

PREAMBLE
I
From the very moment of their appearance, during the decade of the 1830s, savings banks were configured as charitable entities, oriented towards the promotion and protection of savings and the generalization of access to credit for the most disadvantaged social classes. Aspects that remain a deep concern today, such as the protection of the interests of small savers or financial exclusion, that is, the existence of citizens who cannot access conventional financial services due to various circumstances, were addressed by institutions that, beyond their integration into a strongly competitive financial landscape, assumed their own social concerns. This same social vocation led to a natural preference for the most basic financial activity, with lower risk and sophistication, and closer to the citizen's interest. Likewise, alongside this preferential option for a simple business model and its social vocation, the historical action of savings banks always developed from a markedly local perspective, with a deep rootedness in the province or municipalities where they were constituted and with great sensitivity to the needs and peculiarities proper to the territory in which they operate. It is in these primordial factors of a social nature, simplicity of business, and territorial attachment, where historically lay much of their general acceptance and their success as unique banking institutions. Already from the first norm that regulated savings banks, the Royal Order of April 3, 1835, their evolution has been marked by continuous expansion, motivated by the progressive liberalization of their legal regime and their assimilation to that of the rest of credit entities, fundamentally banks. Thus, although during the first half of the 20th century savings banks increased the type of credit operations they carried out, it was during the second half of the last century when they definitively extended their size and influence and were finally established as full-fledged credit entities. This evolution allowed savings banks to carry out increasingly complex operations and substantially expand their territorial scope of action. Specifically, Royal Decree 2290/1977, of August 27, for the regulation of the governing bodies and functions of Savings Banks, was the norm that allowed savings banks to carry out the same operations authorized to private banking. Likewise, the approval of the Spanish Constitution of 1978 and the consequent decentralization of the territorial organization of the State constituted another essential milestone in the configuration of savings banks, since the autonomous communities came to acquire a key role both in the regulation and in the management of these entities. The definitive model of savings banks crystallized finally in Law 31/1985, of August 2, on the Regulation of Basic Norms on Governing Bodies of Savings Banks, which pursued the triple objective of democratizing the governing bodies of savings banks, professionalizing them,
and adjusting the regulatory regime of these entities to the new territorial organization of the State. This Law, together with the regulations issued for its development by the autonomous communities, has drawn the legal regime applicable to savings banks up to the present day, in which their ordinary financial dimension has been accentuated, their social purposes have been linked to the so-called charitable-social work, and their territorial rootedness has been redirected from the mere concentration of their activity in a territory to a more active involvement of the autonomous communities, both in the design of their legal framework and in the influence on their governing bodies. After the full deployment of the model throughout the Spanish geography in recent years, the consequences of the economic crisis on the entire Spanish financial sector have affected savings banks with such intensity that it has been necessary to exhaustively and comprehensively rethink their legal regime. It is not an exaggeration to qualify as historical and unprecedented the speed and depth with which regulatory and operational changes have succeeded in the sector. In fact, the vast majority of Spanish savings banks have participated or are participating in some integration process; the new figure of savings banks with indirect exercise has been created, which develop their financial activity through banking entities, and thus, several entities have begun to trade on official markets; and, even, foundations of a special nature have been provided for in the regulations in order to allow the complete separation of the banking activity and the social work of savings banks. In effect, all this process has been accompanied by abundant legislation that has given inevitably rapid responses to the events that were occurring with extraordinary speed. This legislation, among which it is appropriate to expressly highlight Royal Decree-Law 11/2010, of July 9, on governing bodies and other aspects of the legal regime of Savings Banks, arises from the need to react to the deterioration of the financial situation both at the national and international levels and has sought to promote, facilitate, and ultimately channel the restructuring process of the savings banks. The result is the existence of a set of norms that, in a dispersed manner, contains regulation affecting savings banks. But, above all, it is worth highlighting that during the last years a profound intervention of public powers has been necessary to undertake the solvency and restructuring of a large part of the savings banks, whose financial situation has come to seriously compromise the entire financial stability in Spain. The difficulties in guaranteeing the viability of certain savings banks and their structural weaknesses to autonomously reinforce their solvency have required an extraordinary effort by Spanish society that has included the request for external financial assistance from the Eurogroup partners and
the nationalization of those savings banks that were in the greatest solvency difficulties. Having made this effort, it is now appropriate to approve a law that collects, with a view to stability and in a single text, the future legal regime of savings banks. A new regime that comes to combine the classic values of savings banks already referred to, social character and territorial rootedness, with the lessons that recent historical events have brought to light. II This Law is issued in accordance with what is provided in rules 6th, 11th, and 13th of Article 149.1 of the Spanish Constitution, which attribute to the State competences over commercial legislation, bases of the organization of credit, banking, and insurance, and bases and coordination of the general planning of economic activity, respectively. In relation to the regulation of savings banks, the distribution of competences between the State and the autonomous communities has been well defined in recent decades thanks to the jurisprudence of the Constitutional Court, which has had the opportunity to rule on different occasions to differentiate the aspects relating to the regulation of savings banks that have a basic character and, therefore, are of State competence, from those that, by constituting development legislation, fall within the competence scope of the autonomous communities. This Law takes into account, as it could not be otherwise, this jurisprudence and centers its regulation on those issues defined as basic for the regulation of the Spanish credit sector, such as the establishment of the structure, internal organization, and functions of the savings banks, or the determination of some fundamental aspects of their activity. Likewise, those issues included in this Law that affect the solvency and supervision of savings banks have been included, as they require a uniform regulatory treatment throughout the national territory. It must be kept in mind, in any case, that the legislation approved, although it varies in content, follows a similar formal scheme to that of Law 31/1985, of August 2, on whose constitutionality the Constitutional Court had already ruled. However, there are some novel aspects in this regulation of savings banks, which require some clarification regarding their justification. On the one hand, a restriction on the size of savings banks has been provided for, which is motivated by the need that in no case can they reach a dimension that makes them systemic. It is, therefore, a measure that seeks to guarantee the stability of the financial system. The legal structure of savings banks does not allow them to face crisis situations with the necessary agility due to the difficulties they face in attracting capital. Therefore, it is necessary to prevent savings banks from having an excessive size and endangering the financial system. On the other hand, although related to the above, it has been sought that savings banks operate fundamentally within the
territorial scope of an autonomous community or in neighboring provinces, including in this case the single-province autonomous communities, so that the social function of the entity is linked to a geographical area with common characteristics, peculiarities, and needs. Thus, the link between the place of origin of the savings bank and the territory that will be the beneficiary of the social function is narrowed, which will allow the traditional rootedness that savings banks have had in their place of action. Of course, this regulation affects the essential elements of the functioning of savings banks and, therefore, must have a basic character. With regard to banking foundations, we are facing a novel figure for the Spanish legal system. It is therefore convenient to explain the reasons that justify their regulation with a basic character by the State. According to this Law, those foundations whose participation in a credit entity exceeds a certain percentage will be considered banking foundations. The need to establish a systematic legal regime from a financial perspective for this type of entity is because the banking foundation will be, from the entry into force of this Law, a main actor present in a large part of the credit entities in our country, some of them systemic; therefore, the possibility increases that an inadequate functioning of these entities has consequences for the stability of the financial system. To the extent that they hold significant participations, even of control, in financial entities, the legislator cannot ignore the legal regime of this type of foundation. On the contrary, it is necessary that banking foundations be subject to a regulation similar to that which the State has issued regarding the rest of the credit entities. Only in this way is adequate organization of credit in our country guaranteed. In any case, the need to respect the distribution of competences applicable to this matter, which affects both foundations and the organization of credit and banking, means that the Law simply enters to regulate the fundamental aspects of the organization and functioning of banking foundations, such as those relating to the regime of professionalism and incompatibility of the members who make up the governing bodies, the relations with the participated credit entities, which give rise to the approval of a management plan and a financial plan, as well as supervision and transparency issues. This state intervention in banking foundations is carried out gradually depending on the level of control that the banking foundation can have in the participated credit entity, since the greater its participation in such credit entity, the greater its incidence and impact on financial stability.

OFFICIAL STATE BULLETIN
No. 311 Saturday, December 28, 2013 Sec. I. Page 105879 cve: BOE-A-2013-13723

OFFICIAL STATE BULLETIN
No. 311 Saturday, December 28, 2013 Sec. I. Page 105880 cve: BOE-A-2013-13723

OFFICIAL STATE BULLETIN
No. 311 Saturday, December 28, 2013 Sec. I. Page 105881 cve: BOE-A-2013-13723

III
The Law is structured in two titles, the first of which addresses the regulation proper to savings banks, while the second establishes the regulation relative to banking foundations. Given the close link between both entities, it has been deemed appropriate that their legal regulation be contained in a single normative text.
In relation to the legal regime of savings banks, the structure of Title I of this norm is largely based on that contained in Law 31/1985, of August 2, although significant novelties are introduced.
First, a return to the traditional model of savings banks has been proposed by explicitly linking their financial activity to the needs of retail customers and small and medium-sized enterprises, so that this type of financial entities focus their functions on those layers of society that have more difficulty accessing other types of entities or financial services. In line with the above, this Law introduces the requirement that savings banks develop their actions within the local scope and have a reduced size. The fundamental framework for the action of savings banks must be fundamentally that of the autonomous community where it is implanted, without being able to develop functions at the national level; and it is expressly prevented that savings banks have a size large enough to acquire a systemic character. Those savings banks that grow above the permitted limits will lose their banking license, must transmit their financial activity to a credit entity, and must transform into banking foundations. In this sense, the norm gives continuity and completes the scheme of indirect exercise of financial activity by savings banks provided for in Royal Decree-Law 11/2010, of July 9, on governing bodies and other aspects of the legal regime of savings banks. On the other hand, the Law also carries out an important exercise of professionalization of the governing bodies of savings banks, an aspect whose necessity has been highlighted both internationally and nationally. In particular, from now on it will be necessary that all members of the board of directors of the savings bank, and not just the majority, as was previously required, have specific knowledge and experience for the exercise of their functions. Consequently, there is a translation to savings banks of the professionalism regime applicable to banking entities. This same objective of increasing professionalization in the management of savings banks has also led to introducing important modifications in the composition of the general assembly. Thus, the percentage of participation of Public Administrations is reduced from 40 to 25 percent, and the role of depositors is strengthened by providing a new mechanism for the designation of their representatives in the general assembly and increasing their presence in it up to the range of 50 and 60 percent. This set of measures aims precisely that those people who have deposited their savings in the savings banks can see their interests better represented in the governing bodies. Given the substantial increase in the number and relevance of depositors in the government of savings banks, it is necessary to guarantee a uniform rule throughout the State that determines their election as general councilors. Another aspect of singular relevance addressed with this Law is that relating to the establishment of independence requirements and rules on incompatibility in the exercise of government functions of the savings banks. Particularly novel is, in this
regard, the need for a percentage of independent councilors to exist in the governing bodies and committees of savings banks. The figure of the independent councilor is essential in corporate governance matters, as it takes its decisions in the governing bodies according to criteria of objectivity and neutrality. Title II of the Law addresses the basic regulation on banking foundations, inspired by the figure of special nature foundations collected in Royal Decree-Law 11/2010, of July 9. The regulation begins by defining banking foundations as those foundations that have a minimum percentage of 10 percent participation in a bank, which affects, in view of an inexcusable respect for the principles of equality and non-discrimination, also to those ordinary foundations that have or acquire such percentage of participation in a bank. The regime for transformation into a banking foundation is also regulated, both of savings banks and of ordinary foundations. With regard to savings banks, their transformation will occur in two different cases: when a savings bank grows above the limits permitted by the Law, given that it is necessary that savings banks do not increase their volume to levels that make them systemic; and in the case of savings banks that at the entry into force of the Law are exercising their financial activity through a bank. Since the bank no longer exercises any financial activity and centers its functions on social action, it is not justified, and represents in a certain way an anomaly, that it maintains the banking license. With regard to ordinary foundations, the transformation into a banking foundation will occur in the case that they acquire the aforementioned percentage of 10 percent participation in a bank. The Law also introduces rules regarding the governing bodies of banking foundations, the regime of participation of the banking foundation in the credit entity, as well as obligations in matters of corporate governance and transparency. It is, in any case, that banking foundations, as significant actors of the Spanish credit system, act with the maximum levels of professionalism, independence, transparency, and efficiency, without in any case endangering the solvency of the entities in which they participate. However, it must be highlighted that the application of these norms to banking foundations is carried out according to a stepped scheme, and thus scrupulously respectful of the constitutional distribution of competences, such that certain obligations provided for in this Law will only apply to those banking foundations that have a qualified or controlling participation in a credit entity. Generally, the regulations on corporate governance will apply to all banking foundations, but only to those foundations that have a participation equal to or greater than 30 percent in a credit entity or control over it will be imposed the obligation to draw up a management protocol in which the essential elements that define the
relations between both entities are exposed, as well as a financial plan in which it is defined how the banking foundation can face possible financing needs that in a situation of difficulty might require a credit entity. The highest degree of state normative intervention will finally fall on those banking foundations that hold controlling positions over a credit entity or have a participation greater than 50 percent. These entities must draw up a plan for diversification of their investments to minimize risks and constitute a reserve fund to guarantee the financing of the participated credit entity in situations of difficulty, they cannot exercise political rights when participating in capital increases under certain conditions, and the distribution of dividends must be approved by a reinforced quorum and majority of the general assembly. With this set of measures, it is promoted that banking foundations gradually reduce their participation in credit entities, so that the restructuring process of the Spanish financial system concludes in a reasonable period of time. Finally, the Law includes a series of provisions among which stand out the establishment of a special regime in case of capital increase in credit entities participated by banking foundations, as well as for the distribution of dividends. With regard, in particular, to the increases in the participation of banking foundations with control of a credit entity, the eighth additional provision prevents the exercise of political rights of the shares subscribed in the capital increases of the credit entity. However, it is simultaneously guaranteed that those foundations that acquire shares in an increase can exercise the necessary political rights not to be diluted beyond what is indispensable for their participation to remain below 50 percent or the controlling position of the entity. The first transitional provision, for its part, provides for the transformation of savings banks with indirect exercise into banking foundations within one year from the entry into force of the Law, and the second transitional provision provides the transitional regime for the incompatibility provided for in the second paragraph of Article 40.3. The final provisions specify which articles have a basic character, the necessary regulatory authorizations to develop the Law are made, and the tax legislation is modified, with the object of extending the tax treatment of savings banks to future banking foundations.

INDEX
Article 1. Object.
Title I. On Savings Banks.
Chapter I. General Provisions.
Article 2. Definition, purpose, and applicable regulation.
Chapter II. Governing Bodies.
Article 3. Governing Bodies.
Section 1st. The General Assembly.
Article 4. Representation groups in the General Assembly.
Article 5. General Councilors elected