Royal Decree 1012/2015 developing the Recovery and Resolution Law for Credit Institutions and Investment Firms and modifying the Deposit Guarantee Fund Regulation

OFFICIAL STATE GAZETTE
No. 267 Saturday, November 7, 2015 Sec. I. Page 105911
I. GENERAL PROVISIONS
MINISTRY OF ECONOMY AND COMPETITIVENESS
12056 Royal Decree 1012/2015, of November 6, developing Law 11/2015, of June 18, on the recovery and resolution of credit institutions and investment firms, and modifying Royal Decree 2606/1996, of December 20, on deposit guarantee funds of credit institutions.

INDEX
CHAPTER I General provisions.
Article 1. Purpose.
Article 2. Scope of application.
Article 3. Definitions.
Article 4. Circumstances determining the establishment and application of obligations, requirements, and resolution instruments.
Article 5. Obligations, simplified requirements, and exemptions in the compliance with preparatory measures.
Article 6. Valuation of entities.
Article 7. Content of the entity valuation file.
Article 8. Provisional valuation.
Article 9. Ex post definitive valuation.
Article 10. Valuation of the difference in treatment.

CHAPTER II. Recovery planning and early intervention.
Section 1. Recovery planning.
Article 11. Recovery plans.
Article 12. Evaluation of recovery plans.
Article 13. Evaluation of group recovery plans.
Article 14. Recovery plan indicators.
Section 2. Intragroup financial aid.
Article 15. Agreements on financial aid within a group.
Article 16. Conditions for group financial aid.
Article 17. Authorization of the financial aid agreement proposal.
Article 18. Joint decision on the group financial aid agreement.
Article 19. Supervisors' right to oppose.
Section 3. Early intervention.
Article 20. Coordination of early intervention measures by the competent supervisor on a consolidated basis with other European Union supervisors.
Article 21. Coordination of early intervention measures by the competent supervisor on an individual basis with other European Union supervisors.
Article 22. Joint decision on the coordination of early intervention measures.
Article 23. Appointment and dismissal of the provisional administrator.
Article 24. Competences and functions of the provisional administrator.

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CHAPTER III. Preventive phase of resolution.
Section 1. Resolution planning.
Article 25. Resolution plans.
Article 26. Group resolution plans.
Article 27. Transmission of information between resolution authorities and supervisors.
Article 28. Joint decision on the group resolution plan.
Section 2. Resolvability assessment.
Article 29. Resolvability assessment.
Article 30. Joint decision on the removal of obstacles to the resolvability of groups.

CHAPTER IV. Resolution.
Article 31. Notification requirements.
Article 32. FROB's information obligations.
Article 33. Replacement of the administrative body and general managers or equivalent positions as a resolution measure.

CHAPTER V. Resolution instruments.
Article 34. Requirements for the sale of the entity's business.
Article 35. Operation of the bridge institution.
Article 36. Operation of the asset management vehicle.

CHAPTER VI. Write-down and conversion of capital instruments and internal recapitalization
Article 37. Procedure for the total or partial exclusion of certain admissible liabilities or categories of liabilities.
Article 38. Determination of the minimum requirement for own funds and admissible liabilities.
Article 39. Exemption from the minimum requirement for own funds and admissible liabilities.
Article 40. Determination of the minimum requirement for own funds and admissible liabilities of group subsidiaries and EU parent undertakings.
Article 41. Joint decision on the minimum requirement for own funds and admissible liabilities applicable at consolidated level.
Article 42. Minimum requirement for own funds and admissible liabilities of subsidiaries at individual level and joint decision on the minimum requirement applied at individual level to group subsidiaries.
Article 43. Value of liabilities arising from derivatives.
Article 44. Business reorganization plan.
Article 45. Content and execution of the business reorganization plan.
Article 46. Conversion and write-down of capital instruments.
Article 47. Notification and consultation requirements in the application at consolidated level.

CHAPTER VII. FROB.
Section 1. Financing mechanisms.
Article 48. National Resolution Fund.
Article 49. Determination of annual contributions by the FROB.
Article 50. Extraordinary contributions.
Article 51. Loans between financing mechanisms of European Union Member States.

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Article 52. Mutualization of national financing mechanisms in the case of group resolution.
Article 53. Use of the deposit guarantee system in the context of resolution.
Section 2. FROB actions.
Article 54. Effectiveness of resolution actions in third countries.
Article 55. Restrictions on the enforcement of guarantees.

CHAPTER VIII. Group resolution.
Section 1. Principles of group resolution.
Article 56. General principles relating to the adoption of decisions involving more than one Member State.
Article 57. Resolution colleges.
Article 58. Composition of resolution colleges.
Article 59. Competences and duties of the resolution authority at group level.
Article 60. Exemption from the obligation to constitute a resolution college.
Article 61. European resolution colleges.
Section 2. Resolution of subsidiaries and group resolution.
Article 62. Resolution of subsidiaries forming part of a group.
Article 63. Group resolution.

CHAPTER IX. Agreements with third countries.
Article 64. Agreements with third countries.
Article 65. Recognition and enforcement of third-country resolution proceedings.
Article 66. Right to refuse recognition or enforcement of third-country resolution proceedings.
Article 67. Resolution of branches of entities from third countries.
Article 68. Cooperation with third-country authorities.

Additional Provision First. Single Resolution Mechanism and Single Resolution Fund.
Additional Provision Second. Financial entities and other types of companies.
Additional Provision Third. Management, settlement, and collection of the fee for activities carried out by the FROB as resolution authority.
Transitional Provision First. Transitional regime for contributions to the National Resolution Fund and the Deposit Guarantee Fund.
Transitional Provision Second. References to the consolidated text of the Securities Market Law, approved by Legislative Royal Decree 4/2015, of October 23.
Final Provision First. Modification of Royal Decree 2606/1996, of December 20, on deposit guarantee funds of credit institutions.
Final Provision Second. Competence title.
Final Provision Third. Incorporation of European Union law.
Final Provision Fourth. Development power.
Final Provision Fifth. Entry into force.

Annex I. Information to be included in recovery plans.
Annex II. Information that preventive resolution authorities may require from entities for the preparation and maintenance of resolution plans.
Annex III. Issues that resolution authorities must consider when assessing the resolution of an entity or a group.

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The regulation approved in recent years to address situations of potential difficulty in which credit institutions and investment firms may find themselves rests on a series of principles that, taking into account the characteristics and specialties inherent to the financial system, are inspired by the recent experience generated when undertaking resolution processes of entities.

These principles materialize in the need to establish a preventive phase that ensures the conditions required are met so that, if an entity must be liquidated, its resolution is carried out in an orderly manner; in the articulation of a special, agile, and effective procedure that allows for the resolution of credit institutions and investment firms and is applied instead of insolvency legislation when reasons of public interest and the protection of financial stability so require; in the guarantee of proper separation between supervisory and resolution functions, in order to avoid conflicts of interest that the supervisory authority might incur by exercising resolution powers simultaneously; and finally, as a fourth fundamental principle, ensuring that the absorption of resolution losses is borne by the shareholders and creditors of the entity, and not with public resources.

It is precisely these principles that inform "Directive 2014/59/EU of the European Parliament and of the Council of 15 May 2014 establishing a framework for the recovery and resolution of credit institutions and investment firms and amending Council Directive 82/891/EEC, and Directives 2001/24/EC, 2002/47/EC, 2004/25/EC, 2005/56/EC, 2007/36/EC, 2011/35/EU, 2012/30/EU and 2013/36/EU, and Regulations (EU) No 1093/2010 and (EU) No 648/2012 of the European Parliament and of the Council"; as well as "Regulation (EU) No 806/2014 of the European Parliament and of the Council of 15 July 2014 establishing uniform rules and a uniform procedure for the resolution of credit institutions and certain investment firms in the framework of a Single Resolution Mechanism and a Single Resolution Fund and amending Regulation (EU) No 1093/2010", which, as is known, delimit the European regulatory framework on the resolution of these entities and outline the fundamental elements of the Single Resolution Mechanism, one of the pillars of the Banking Union.

In order to transpose Directive 2014/59/EU of 15 May 2014 into the Spanish legal order, Law 11/2015 of 18 June was approved this same year, which is inspired by the principles of Law 9/2012, of 14 November, on the restructuring and resolution of credit institutions, and which completes that norm in those areas of European Union Law that were not yet incorporated into our legal order. This royal decree concludes, on the one hand, the transposition of the aforementioned Directive and, on the other hand, develops certain aspects of Law 11/2015, of 18 June, especially those of an organizational nature.

The royal decree consists of nine chapters, 3 additional provisions, 2 transitional provisions, and 5 final provisions. It also includes three annexes.

Chapter I contains the general provisions, which include the criteria for modulating the application of resolution regulations and allowing for the establishment of simplified obligations and exemptions for certain entities. It also regulates in detail how the valuation of entities must be carried out prior to the adoption of any resolution measure.

In Chapter II, the content of recovery plans is specified, along with the criteria for their evaluation by the competent supervisor, and the requirements and information duties to which agreements on financial aid that entities conclude within a group are subject are specified. Furthermore, regarding resolution plans, both in this chapter and the next, rules for coordination and decision-making by supervisory authorities in the case of action at group level are established.

In Chapter III, the content of resolution plans, both individual and group, is specified. Additionally, the aspects that the preventive resolution authority must take into account when evaluating obstacles to the resolvability of an entity are determined.

In Chapter IV, the procedural, coordination, and information obligations that must be complied with in the case that an entity is subject to a

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resolution procedure are detailed, to ensure due knowledge by the competent authorities, affected shareholders, and creditors.

In Chapter V, rules on the operation of resolution instruments, which due to their level of detail were not contemplated in Law 11/2015, of 18 June, are included. In particular, the actions that the FROB must carry out for the application of these instruments are specified.

In Chapter VI, certain aspects relating to the write-down and conversion of capital instruments and internal recapitalization are regulated, particularly those relating to the determination of the minimum requirement for own funds and admissible liabilities, the valuation of liabilities arising from financial derivatives, and the content of the business reorganization plan.

In Chapter VII, the rules necessary to determine the conditions for the use of the financing mechanisms available to the FROB for financing resolution measures are established, and the contribution of contributions to the National Resolution Fund by entities is regulated.

In Chapter VIII, the resolution of a group of entities acting cross-border is addressed in general terms, as well as the composition and competences of resolution colleges, such that a coordinated solution to these especially complex situations is favored given the international nature of the entity.

In this chapter, as in the next, the role of the FROB acquires special relevance, not only because it will be the authority presiding over the resolution college in cases where it is the resolution authority at group level, and therefore will be in charge of the direction and coordination functions of the college; but because, beyond the function assigned to it as president or member of resolution colleges, Law 11/2015, of 18 June, attributes to it, in general, the role of the Spanish contact and coordination authority for the purposes of cooperating with international authorities and those of the Member States of the European Union.

In Chapter IX, the relationship with third countries is regulated and the conclusion of agreements on the recognition of resolution actions is promoted, as the global nature of many entities requires also having cooperation frameworks that involve countries that are not part of the European Union.

In the additional provisions, national resolution regulation is aligned with that regulating the Single Resolution Mechanism at the European level; the application of this royal decree is extended, in certain cases, to other types of legal persons that are part of the group of an entity; and the regulation of the management, settlement, and collection of the fee to which entities are subject to support the administrative expenses of the FROB is developed.

The first transitional provision sets the deadlines by which entities must make ordinary contributions during the 2015 fiscal year to the National Resolution Fund, and the second transitional provision provides a transitional regime for the references made to the consolidated text of the Securities Market Law, approved by Legislative Royal Decree 4/2015, of October 23.

Regarding the final provisions, in the first final provision, Royal Decree 2606/1996, of December 20, on deposit guarantee funds of credit institutions, is modified, in order to develop the new articles that Law 11/2015, of 18 June, introduced into Royal Decree-Law 16/2011, of October 14, by which the Deposit Guarantee Fund of Credit Institutions is created. In this way, the transposition of Directive 2014/49/EU of the European Parliament and of the Council of 16 April 2014 on deposit guarantee systems is completed.

The modifications to Royal Decree 2606/1996, of December 20, represent a change in the calculation base for contributions to the new deposit guarantee compartment of the Deposit Guarantee Fund of Credit Institutions. Thus, the calculation base for contributions, following what is established in Directive 2014/49/EU of 16 April 2014, will not be determined by the total volume of deposits eligible to be covered by the Fund but only by the effectively guaranteed amount thereof. On the other hand, it is worth highlighting the reduction of the period within which the Deposit Guarantee Fund of Credit Institutions must reimburse depositors the amounts due, which will be progressively reduced from the current twenty business days to seven business days in 2024. Furthermore, the cooperation regime of the Deposit Guarantee Fund of Credit Institutions with the deposit guarantee systems of other European Union Member States is regulated, especially with respect to the reimbursement of deposits made in branches operating outside their country of origin. Under the terms and circumstances applicable, the use of the Fund will be adjusted to State aid regulations.

The remaining final provisions refer to the competence titles supporting the royal decree; the incorporation of the European Union provision; the regulatory enabling power; and the entry into force of the norm.

Finally, the royal decree includes three annexes that enumerate the information that must be included in recovery and resolution plans; the information that preventive resolution authorities may require from entities for the preparation and maintenance of resolution plans; and the issues that resolution authorities must assess when facing the resolution of an entity.

This royal decree is approved by virtue of the enabling contained in the sixteenth final provision of Law 11/2015, of 18 June, which empowers the Government to issue the necessary regulatory norms for the development of what is provided in that law.

By virtue thereof, upon proposal of the Minister of Economy and Competitiveness, with the prior approval of the Minister of Finance and Public Administrations, in agreement with the Council of State and after deliberation by the Council of Ministers in its meeting on November 6, 2015,

I HEREBY ORDER:

CHAPTER I
General Provisions

Article 1. Purpose.
This royal decree aims to develop what is provided in Law 11/2015, of 18 June, on the recovery and resolution of credit institutions and investment firms.

Article 2. Scope of application.
This royal decree applies to the entities provided for in Article 1.2 of Law 11/2015, of 18 June, excluding those mentioned in Article 1.3 of said law.

Article 3. Definitions.
The definitions provided in Article 2 of Law 11/2015, of 18 June, shall apply to this royal decree.

Article 4. Circumstances determining the establishment and application of obligations, requirements, and resolution instruments.
When establishing or applying the obligations and requirements contemplated in Law 11/2015, of 18 June, or using the different instruments available, the competent supervisors and resolution authorities shall take into consideration the following circumstances that may be present in an entity:
a) The nature of its activities. b) The structure of its shareholding.

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No. 267 Saturday, November 7, 2015 Sec. I. Page 105917 c) The legal form. d) The risk profile. e) The size. f) The legal status. g) The interconnection of the entity with other entities or with the financial system in general. h) The scope and complexity of its activities. i) Membership in an institutional protection scheme that meets the requirements established in Article 113.7 of Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms, and amending Regulation (EU) No 648/2012, or other mutual solidarity systems of cooperation mentioned in Article 113.6 of the aforementioned regulation. j) The provision of any investment service or activity as defined in Article 4(1)(2) of Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU.

Article 5. Obligations, simplified requirements, and exemptions in the compliance with preparatory measures.

1. The competent supervisor and preventive resolution authority shall take into account the following criteria to determine the obligations and simplified requirements for compliance with preparatory measures provided for in Chapters II and III of this royal decree:
   a) The singular circumstances provided for in the previous article. b) The rules, guidelines, or directives adopted on the matter at the international or European level and incorporated or adopted into our legal order. c) The impact that the insolvency of an entity could have on financial markets, other entities, financing conditions, or the economy in general, due to the circumstances provided for in the previous article. d) The possible negative effects of the insolvency of an entity and its subsequent liquidation according to insolvency procedures on financial markets, other entities, financing conditions, or the economy in general.
2. The simplified requirements that the supervisor and preventive resolution authority may impose shall refer to the following elements:
   a) The content and details of the recovery and resolution plans provided for in Chapters II and III of Law 11/2015, of 18 June. b) The extension or reduction of the deadline by which the first recovery and resolution plans must be ready and the frequency

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