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2. Financial institutions

2.3 Financial auxiliaries

2.3.1 Credit financial establishments

Credit financial establishments (Establecimientos Financieros de Crédito) are institutions specialized in certain activities (e.g. financial leasing, financing, mortgage loans, etc.) which cannot raise deposits from the general public.

Their key features are summarized below:

Basic regulations
  • Law 5/2015 of April 27, 2015 on the promotion of business financing.
  • Law 3/1994, of April 14, 1994, adapting Spanish legislation on credit institutions to the Second Council Directive on Banking Coordination and introducing other modifications relating to the financial system, in the area of credit financial establishments.
  • Royal Decree 692/1996, of April 26, 1996, establishing the legal regime for credit financial establishments.
Corporate purposeTheir scope of operations is the pursuit of banking and para-banking activities:

  • Financial leasing with certain complementary activities.
  • Lending and the provision of credit facilities, including consumer credit, mortgage loans, and the financing of commercial transactions.
  • Factoring with or without recourse.
  • Issuing guarantees and similar commitments.
  • The granting of reverse mortgages.

They may perform any accessory activities necessary for the better pursuit of their principal activity.

Credit financial establishments may carry out, in addition to the aforementioned activities, the provision of payment services and the issuing of electronic money6, by obtaining one specific authorization. This being the case, credit financial establishments shall be deemed as hybrid payment institutions or hybrid electronic money institutions and would be subject to the provisions applicable to such institutions.

They are prohibited from raising funds from the general public and are therefore not required to form part of a Deposits Guarantee Fund. They can nevertheless take repayable funds through the issue of securities, in accordance with the provisions of Legislative Royal Decree 4/2015, of October 23 2015, approving the revised Securities Market Law (LMV) and its enabling regulations, subject to the requirements and limitations imposed specifically in respect of EFCs. EFCs are able to securitize their assets, in accordance with the provisions of the legislation on securitization funds.
Minimum capital
  • Minimum capital stock of €5 million. Must be fully subscribed and paid in.
Managing body
  • The Board of Directors must have no fewer than three members.
  • All members of the entity's Board of Directors, and those of the Board of Directors of its parent company where there is one, must be persons of good repute in business and professional terms, have the knowledge and experience necessary for the performance of their functions, and be committed to the good governance of the entity.
  • The requirements with respect to good repute and knowledge and experience also apply to general managers or persons holding similar positions, to those in charge of the internal control functions, and to those holding other positions which play a key part in the day-to-day pursuit of the activities of the entity and of its parent company.
  • Registration of managers, directors or similar executives on the Register of Senior Officers.
Shares
  • Shares must be registered.
  • Divided into number and class.
  • Possible restrictions on their transferability.
Formation of credit financial establishments
  • It is up to the Ministry of Economic Affairs and Digital Transformation to authorize the formation of credit financial establishments.
  • Must be registered on the Special Register of the Bank of Spain.
  • Must take the form of a corporation incorporated under the simultaneous foundation procedure for an indefinite term.

Royal Decree-Law 14/2013, of November 29, 2013, on urgent measures to adapt Spanish law to the EU legislation on supervision and solvency of financial institutions (hereinafter, "Royal Decree-Law 14/2013") modified the legal regime for Credit Financial Establishments which, from January 1, 2014, and until a new regime is approved for them (envisaged in the Bill on Promoting Business Finance), lose their status as credit institutions.

This regime has been approved by Law 5/2015 of April 27, 2015 on the promotion of business financing, according to which credit financial establishments cannot be classed as credit institutions. This law nevertheless envisages the supplementary application of the legislation on credit institutions in all areas not specifically addressed by the legislation on credit financial establishments. In particular, the rules established for credit institutions which are applicable to credit financial establishments include the following: those on significant holdings, suitability and incompatibility of persons in senior management positions, corporate governance, solvency, transparency, the mortgage market, the regime on insolvency and prevention of money laundering and financing of terrorism.

As of December 31, 2019, 27 Credit Financial Institutions had registered on the Bank of Spain’s Administrative Register.

2.3.2 Payment Institutions

Regulated by Royal Decree 19/2018, of 23 November, on payment services and other urgent financial measures, payment institutions7 are those legal entities, other than credit institutions and electronic money institutions, which have been granted authorization to lend and execute payment services, that is, services that permit effective deposits in a payment account, and those enabling cash withdrawals, the execution of payment transactions, and the issuance and acquisition of payment instruments and money remittances. Payment institutions are not authorized to collect deposits from the general public or to issue electronic money. In this regard, it should be noted Ministerial Order EHA 1608/2010, of June 14, 2010, on transparency of conditions and reporting requirements applicable to payment services, and Royal Decree 736/2019 of 20 December on the legal regime for payment services and payment institutions and amending Royal Decree 778/2012 of 4 May on the legal regime for electronic money institutions and Royal Decree 84/2015 of 13 February implementing Law 10/2014 of 26 June on the organisation, supervision and solvency of credit institutions which supplement the above-mentioned Law 16/2009.

As of December 31, 2019, there are officially registered at the Bank of Spain 42 payment institutions, 12 branches of non-Spanish EU payment institutions, and 2 networks of agents of EU payment institutions.

2.3.3 Electronic Money Institutions

Electronic money institutions (introduced by Law 44/2002 on Measures for the Reform of the Financial System or Financial Law) are credit institutions specialized in issuing electronic money, that is, monetary value represented by a claim on its issuer: a) stored on an electronic device; b) issued on receipt of funds of an amount not less in value than the monetary value issued; and c) accepted as a means of payment by undertakings other than the issuer. As a consequence of the development of the sector, which made it advisable to amend the regulatory framework of the electronic money institutions and of the issuance of electronic money, the Electronic Money Law 21/2011, of July 26, 2011 has been approved and implemented by Royal Decree 778/2012, of May 4, 2012, on the legal regime for electronic money institutions. The aim of this law is threefold: (i) to make regulation of the issuance of electronic money more specific, clarifying the definition of electronic money and the scope of application of the law; (ii) to remove certain requirements that are deemed inappropriate for electronic money institutions; and (iii) to guarantee consistency between the new legal regime for payment institutions, described above, and electronic money institutions. In this regard, electronic money institutions are also authorized to provide all the payment services typical of payment institutions. As in the case of payment institutions, these entities cannot take deposits or other repayable funds from the public.

As of December 31, 2019, there are 4 electronic money institutions officially registered at the Bank of Spain, 8 branches of non-Spanish EU electronic money institutions, and 1 network of agents of EU electronic money institutions.

2.3.4 Mutual Guarantee and Counter-Guarantee Societies

Mutual guarantee societies were first introduced in 1978 and since then have operated in the area of medium- and long-term financing of small and medium-sized enterprises, to which they provide guarantees, mainly, through endorsements. The legal regime by which they are regulated is established in Law 1/1994 of March 11, 1994 on the Legal Regime governing Mutual Guarantee Societies and the corresponding enabling regulations.

As of December 31, 2019, there were a total 18 mutual guarantee societies registered at the Bank of Spain.

Their corporate purpose is as follows:

  • To provide their members with access to credit and to credit-related services.
  • To improve the financial conditions of their members.
  • To provide personal guarantees in any lawful form, other than in the form of an insurance surety.
  • To provide financial advice and assistance to their members.
  • To take holdings in companies and associations whose sole purpose is to engage in activities for small and medium-sized companies. To this end, they must have the required reserves and obligatory provisions.

Members of mutual guarantee societies can be of two types: (i) participating members and (ii) protector members.

Counter-guarantee societies, which are classed as financial institutions for the purposes of Law 1/1994, with the legal form of corporations, and which necessarily have an ownership interest held by the State, coexist with these mutual guarantee societies. Their purpose is to provide sufficient coverage and assurance for the risks assumed by the mutual guarantee societies, also furnishing the cost of the guarantee for the members. The legal regime applicable to them is supplemented by Royal Decree 2345/1996 of November 8, 1996 setting out the rules on the administrative authorization of and solvency requirements applicable to counter-guarantee societies, and Royal Decree 1644/1997 of October 31, 1997 setting out the rules on the administrative authorization of and solvency requirements applicable to counter-guarantee societies. At 31 December 2019, there was one counter-guarantee company registered with the Bank of Spain.

2.3.5 Valuation companies

These companies are authorized to perform appraisals of real estate for certain types of financial institutions, in particular those related to the mortgage market.

Officially approved valuation companies are registered and supervised by the Bank of Spain. Their administrative rules, which aim to enhance the quality and transparency of appraisals, are established in Royal Decree 775/1997 of May 30, 1997 and Law 2/1981 regulating the mortgage market.

As of December 31, 2019, there are 325 valuation companies officially registered at the Bank of Spain.

6In the terms described in sections 2.3.2 and 2.3.3. of this Annex.

7Payment institutions have their origin in currency-exchange bureau.