## _cr06223 ## Source details **Canonical URL:** [_cr06223](https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2006/_cr06223.pdf) ## Other formats - [Markdown version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2006/_cr06223.pdf.md) - [Structured JSON version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2006/_cr06223.pdf.json) --- ### Information and methodology - Assessment carried out as part of the Financial Sector Assessment Program (FSAP) against the IMF Code of Good Practices on Transparency in Monetary and Financial Policies (MFP Transparency Code). - Assessment period: undertaken during June-July 2005; the author was Camilla Ferenius (Bank of Sweden); assessment carried out from June 22 to July 1, 2005. - Coverage: primarily the Bank of Spain (BE); transparency in the institutional framework also covers the Ministry of Economy and Finance (ME) and the Autonomous Communities (ACs). - Evidence base: - (a) relevant laws; - (b) information on the BE website; - (c) BE’s and bank supervision annual reports and other publications; - (d) responses to a pre-FSAP questionnaire; - (e) extensive discussions with officials of the financial agencies; and - (f) discussions with commercial banks and bankers’ associations. - Spanish authorities cooperated fully and provided necessary clarifications and documents. ### Institutional and market structure — Bank of Spain (BE) and related bodies - Supervisory authority: - Directorate General of Supervision (DGS) performs BE supervisory function relating to banks under directions of the Governing Council on the legal basis of the Law of Autonomy of the Bank of Spain (Law 13/1994, LABE). - Legal framework further defined by the Law on Discipline and Intervention of Credit Institutions (Law 26/1988, LDI). - BE’s Internal Regulations (RIBE) are disclosed on the website. - Institutions under BE supervision: - commercial banks; - savings banks (cajas de ahorros); - credit cooperatives; - specialized credit institutions; - electronic money issuers; - subsidiaries and branches of foreign credit institutions. - Governing Council composition: Governor, Deputy Governor, six members elected by the government, Director General of Treasury and Financial Policy (ME), and Vice President of the National Securities Market Commission (CNMV). BE director generals and a staff representative attend Council meetings in a nonvoting capacity. - Communications function and website: - Communications Department disseminates policy decisions and announcements, publishes major speeches, data, research reports, arranges seminars, maintains media contacts. - BE website (www.bde.es) contains general information, legislation and regulation, statistics, publications; available in Spanish and English. ### Practice-by-practice assessment: method and ratings - Five-part assessment system used: Observed; broadly observed; partly observed; not observed; not applicable. - Observed: full observance or with insignificant shortcomings. - Broadly observed: minor weaknesses not seen as significant. - Partly observed: shortcomings sufficient to raise doubts about achieving observance. - Not observed: practice not being observed; no substantive progress recorded. - Not applicable: practice not applicable given country circumstances. - Detailed results summarized in section-specific tables (excerpts provided below). ### Clarity of roles, responsibilities, and objectives — selected findings (5.1 series) - Practice 5.1 — legal and institutional definition: - LABE (Law 13/1994) and LDI (Law 26/1988) set BE status, objectives and supervisory remit (including Art. 7 and Art. 43 bis LDI). - Institutional framework and DGS organization/functions disclosed on BE website under Functional Structure. - Regulatory responsibility principally held by ME through the Directorate General of Treasury and Financial Policy; BE may be delegated regulatory powers via Royal Decrees and Orders and may issue “Circulares” under Article 3 LABE. - Regional governments (ACs) have regulatory and supervisory powers for savings banks; statutes and savings bank laws specify ACs’ roles. - Assessment: Observed. - Practice 5.1.1 — disclosure of BE objectives: - Art. 7.2 LABE: BE objectives include price stability (main) and support to general economic policy; financial stability is mentioned among functions but not listed as principal objective. - Website and annual reports mention banking supervision objective; Memoria Anual de Supervisión 2003 references safeguarding the stability of the financial system. - Assessment: Broadly observed. - Comment: Objectives are only briefly mentioned in annual report and website and not explicitly in legislation; disclosure should be more easily accessible and better explained (e.g., on the Banking Supervision webpage). - Practice 5.1.2 — disclosure of responsibilities and authority: - Art. 7 LABE sets out Bank’s functions and responsibilities; quoted LABE text appears in assessment. - Assessment: (assessment text continues beyond excerpt). ### Supervisory responsibilities, cooperation, and regional arrangements (6 / 6.1 series) - Regulatory responsibility principally held by ME; delegation to BE or CNMV only in specific areas through Royal Decrees and Orders; BE may issue Circulares (Art. 3 LABE). - LDI defines institutional framework and supervisory authority (Art. 43 bis). - Savings banks (cajas) regulated and supervised by the BE as well as the respective AC; AC powers include internal organization regulation, approval of mergers/sales, appointment/removal of governing body members, approving social work plans, imposing sanctions, and authorization of cajas. - Bank licenses granted and removed by the ME upon recommendation of the BE. - Assessment: Observed. - Comment: “Transparency would be enhanced if legislation and regulation of the cajas by the ACs were more easily accessible on the websites.” ### Accountability, reporting and public disclosure (6; 8.2 series) - Art. 10 LABE requires BE to report on monetary policy to parliament and government and permits Governor appearances before parliamentary committees and relevant councils. - Arts. 4 LABE and 33 RIBE: government approves annual balance sheet and accounts; BE subject to external auditing by the National Audit Office (Law 2/1982). - Art. 21.1c: Governing Council approves annual report and other reports submitted to Parliament/government. - BE publishes: - annual complaints report (Memoria del Servicio de Reclamaciones); - special annual report on supervisory function (Memoria de la Supervisión Bancaria en España); - annual reports and speeches publicly available on BE website. - Assessment: Observed. ### Appointment, terms, incompatibilities and removal of BE governing bodies - Arts. 24–26 LABE set procedures: - Governor appointed by the King following government proposal; nominees Spanish with recognized competence; Deputy Governor appointed by government following Governor proposal. - Six elected Council members appointed by government on Minister of ME proposal after consultation with Governor; six-year term; reappointment once. - Terms of office of Governor and Deputy Governor: six years, non-renewable for same position; elected Council members six years, may be reappointed once. - Reasons for leaving include expiration, resignation, reaching 70 years, government dismissal for specified causes. - Incompatibilities: Governor/Deputy Governor subject to senior official incompatibilities; two-year post-term restriction on engaging in professional activity linked to credit institutions or securities markets. - Assessment: Observed. ### Inter-agency cooperation and memoranda (relationship among BE, CNMV, DGSFP, ACs) - Division of responsibilities: - BE: credit institutions (LABE). - CNMV: securities markets (LMV, Law 24/1988). - DGSFP: insurance companies and pension funds. - ACs: regulatory and supervisory powers over cajas. - Legal bases for cooperation: Art. 7.8 LABE; Financial Law (DA 2 Law 44/2002); Art. 88 LMV; Art. 12.3 Law 13/1992; Arts. 17 LMV and 20 LABE (cross-membership). - Agreements and MoUs: - BE signed agreements with CNMV (June 9, 2004) and DGSFP (March 12, 2004); published in 2004 annual report on supervision. - BE has multiple international MoUs, especially in Latin America. - Relationship with ACs anchored in Art. 43 bis.8 LDI, Art. 7.6 and 8 LABE, and DA 1ª a. 3 Law 31/1985 (LORCA). - Assessment: Broadly observed. - Comment: Minimize overlapping national and regional legal frameworks that may cause conflicts, particularly in supervisory or sanctioning authority. ### Transparency of conduct of policies, regulatory disclosure and circulars (6.1; 7.5) - BE publishes annual report on supervision, annual BE report (from 2003 includes management report with supervision/regulation activities), annual complaints report; functions described on BE website/About us/Functions/Banking Supervision. - Art. 3 LABE: BE may adopt “Circulares” (published in BOE). Legal and regulatory framework posted on website (LABE, LDI, RIBE). - Risk-based supervision described in 2003 annual report on supervision (Spanish only). - Assessment: Observed. - Recommendations: Post 2001 annual report on supervision material on the website and consider translating into English; update organization of BE circulars to improve transparency. ### Financial reporting and emergency support (6.1.2; 7.3.1) - BE Circular 4/2004 regulates public and confidential information provided to the supervisor and models of financial statements; adapts Spanish accounting regime to the IASB. - LOLR access via marginal credit facility of the ESCB; terms are one day, rate set by ECB, access automatic subject to qualified collateral; collateral list published and updated weekly by the ECB. - Assessments: 6.1.2 Observed; 7.3.1 Not applicable. ### Public announcements, periodic reporting, consultations and communications (6.2; 6.3; 6.4; 7.4) - BE publicly announces and explains significant changes in financial policies via Annual Report, website, notas informativas, monthly publications, press releases; BOE publication follows day after decisions; Q&A system on website. - Specific publications program includes monthly Boletín Económico, Estabilidad Financiera, Boletín Estadístico, Memoria de la Supervisión Bancaria, public debt reports, Memoria del Servicio de Reclamaciones; BE annual report published in June and distributed to over 3,200 subscribers and on website. - Public consultations: legal basis Arts. 3.2 LABE and 8.5 RIBE; consultations typically allow not less than three months; received comments made public after consultation period (example: Circular 4/2004 process). - Communications Department activities and statistics (2004): - BE issued 49 information notes in 2004; - Governor speeches: 22 in 2004; Deputy governor: 2 in 2004; Directors general: Supervision 1, Regulation 10, Studies 5 (in 2004). - Assessment: Observed (6.2, 6.3, 6.4, 7.4) though BE English banking supervision section is not updated; recommendation to improve English/Spanish website coordination and accessibility of banking supervision content. ### Deposit insurance, consumer protection and complaints disclosure (7.6; 7.7) - Legal basis for deposit insurance: RDL 4/1980, RDL 18/1982, RD 2606/1996; investor protection RD 948/2001. - Deposit Guarantee Fund website (www.fgd.es) and BE section dedicated to deposit insurance contain detailed information. - Consumer protection framework: Arts. 22–31 Financial Law (Law 44/2002); Commission for the Protection of Clients of Financial Services; BE authority to regulate consumer protection arrangements (Art. 31 Financial Law and Art. 8.4 Order 303/2004); BE Complaints Service annual report published on website. - Assessment: 7.6 Not applicable (not BE responsibility as supervisor); 7.7 Observed. ### Accountability, appearances before public authorities (8.1) - Art. 10 LABE formalizes reporting to Parliament; Governor appears regularly before parliament, usually three times a year. - Practice (2004): Governor appeared before Budget Commissions of Congress and Senate and Economy and Finance Commission. - Speeches and appearances are made public in the Diario de Sesiones del Congreso. - Assessment: Observed. - Recommendation: Better coordination of English and Spanish websites for published speeches. ### Public disclosure of audited financial statements and internal governance (8.2; 8.2.2; 8.3; 8.4) - Arts. 4.2 LABE and 29 and 32 RIBE require submission of BE accounts to Audit Committee, external auditors and the National Audit Office; annual accounts included in Annual Report (issued in June). - Internal Audit Department by-laws (approved November 28, 2001) made public on website; internal audit activities disclosed in management report section of annual report. - Code of Conduct (internal circular BE 10/2002) requires annual registration of staff financial activities; Code is not publicly available (posted on internal website). - Assessment: 8.2 Not applicable (DGS funding part of BE budget); 8.2.2 Observed; 8.4 Broadly observed. - Recommendation: Public disclosure of Code of Conduct would strengthen transparency. ### CNMV — institutional framework, disclosure and recommendations (selected) - Legal basis: Capital Markets Law (Law 24/1988, LMV); Art. 13 objective: ensure transparency of securities markets, correct formation of prices, and protection of investors. - Governance: Board includes president and vice president appointed by government, Director General of Treasury and Financial Policy, deputy governor of BE, and three commissioners appointed by Minister of ME. - CNMV public consultation and advisory arrangements: Advisory Committee (~20 members) reports on draft general regulations; “Documents under consultation” section on website; circulars sent to Advisory Committee prior to approval. - Publications and reporting: - Annual Report on Activities and Annual Report on the Securities Markets issued in Spanish and English; distribution to press, markets, supervisory authorities and universities; reports usually approved in May and distributed in early June. - Monthly reports, monthly bulletin The CNMV Informs; daily real-time website information. - Auditing and internal governance: - Annual accounts audited by Comptroller General (IGAE); audit process and National Audit Office reporting described; internal regulation (RRI) approved July 2003 published in BOE and on CNMV website. - MoUs and international cooperation: - CNMV has agreements with BE, DGSFP, SEPLAC; MoUs with IOSCO, FESCO, LIFFE; national agreements are not always disclosed. - Assessment: Broadly observed for information sharing; recommendation to publish national MoUs and make consultation procedures public. - Key recommended actions for CNMV: - Release text of President’s speeches. - Publish existing MoUs with national authorities. - Publish internal procedures (post-approval) in BOE and on website. - Include notes to financial statements in published annual report. - Promote more information disclosure by FGI on investor protection details. ### Deposit Insurance Funds (FDG / Funds) — transparency and governance (selected) - Relationship with BE regulated in RD 2606/1996; Management Committees include BE representation; Funds accountable to BE and may draw on BE funds exceptionally. - Fee structure (RD 2606/1996 Art.3): “annual contributions by member institutions of the Funds shall be 2 per 1,000 of the deposits held as at the end of the financial year for which the guarantee is given... plus 5 per 100 of the quoted value of the stock covered by the system...”; Minister of Economy may agree to decrease contributions when assets sufficient; contributions suspended when assets not committed ≥ 1 per cent on the base of calculation. - Annual audited financial statements: Funds provide annual accounts to members and BE; audited by independent auditors, approved by Management Committee, made public and posted on website; complementary information remitted to the National Audit Office. - Governance transparency gaps: - Internal governance procedures exist but are not fully public; reduced administrative size (15 employees) means no internal audit for Funds; Management Company has Controlling Council with internal control functions. - Assessments for FGD: some practices Partly observed; recommended publication of internal governance procedures and a more proactive public communications policy. - Recommendations for Funds: - Publish internal governance procedures and standards of conduct beyond legislation. - Adopt formal policy and track record for appearances of FGD officials before designated public authority in relevant cases. - Improve disclosure on investor protection scheme (FGI) operating procedures, financing, and performance. ### Payment systems oversight — key findings and recommendations - BE responsible for national payment system oversight (LABE); since December 2004 Spain has two payment systems: SLBE (operated by BE) and SNCE (low-value payments). - SNCE operated by Sociedad Española de Sistemas de Pago S.A. (SESP); BE supervises SESP (Law 41/1999 as modified by Law 2/2004). - Public disclosure and policy principles: - BE payment systems materials posted on website/Payment systems include formal declaration El Banco de España y la Vigilancia de los Sistemas de Pago and links to Eurosystem documents. - BE publications on payment systems include Financial Stability Review articles and occasional pamphlets; management report section of Annual Report includes payment systems operations but not oversight activities. - Assessment highlights: - Observed: many practices (payment system oversight legal bases, consultations, public reporting of aggregate operational data). - Partly observed: periodic reporting on oversight (7.1/7.4.1) — recommendation to issue a periodic report on payment systems including oversight objectives and to include oversight activities in BE’s Management Report. - Broadly observed: formal procedures for information sharing and consultation (6.1.5) — recommendation to publish MoU contents, not only year signed. - Recommended actions for payment systems oversight: - Make public the content of MoUs, not only the year signed. - Issue a periodic report on payment systems operations and oversight; mention payment system oversight activities in BE’s Management Report. - Update payment systems web content (e.g., SPI references) and reorganize BE circulars for clarity. ### Summary observance statistics (excerpted counts) - Bank of Spain (summary Table 2 highlights): - Observed: 20 practices (examples include 5.1; 5.1.2; 5.1.3; 5.1.4; 6.1.1; 6.1.2; 6.2; 6.3; 6.4; 7.1; 7.2; 7.4.1; 7.4.2; 7.5; 7.7; 8.1; 8.2.2; 8.4.1) - Broadly observed: 4 practices (5.1.1; 5.2; 6.1; 6.1.5; 7.4; 8.4) - Not applicable: 12 practices (5.3; 5.3.1; 5.4; 5.5; 6.1.3; 6.1.4; 7.3; 7.3.1; 7.6; 8.2; 8.2.1; 8.3) - CNMV (summary Table 5 highlights): - Observed: 33 practices (including 5.1; 5.1.1; 5.1.2; 5.1.3; 5.1.4; 5.2; 5.3; 5.3.1; 5.4; 5.5; 6.1; 6.1.1; 6.1.2; 6.1.3; 6.1.4; 6.2; 6.3; 6.4; 7.1; 7.2; 7.3; 7.4; 7.4.1; 7.5; 7.6; 7.7; 8.1; 8.2; 8.2.1; 8.2.2; 8.3; 8.4; 8.4.1) - Broadly observed: 2 practices (6.1.5; 7.4.2) - Not applicable: 1 practice (7.3.1) - Deposit Insurance Funds (selected Table 8 highlights): - Observed: 22 practices (5.1; 5.1.1; 5.1.2; 5.1.3; 5.1.4; 5.2; 6.1; 6.1.1; 6.1.4; 6.1.5; 6.2; 6.3; 7.2; 7.3; 7.3.1; 7.4; 7.4.1; 7.5; 7.6; 8.2; 8.2.1; 8.3) - Broadly observed: 1 practice (8.4) - Partly observed: 3 practices (7.4.2; 8.1; 8.2.2) - Not applicable: 10 practices (5.3; 5.3.1; 5.4; 5.5; 6.1.2; 6.1.3; 6.4; 7.1; 7.7; 8.4.1) - Payment Systems Oversight (Table 11 highlights): - Observed: 21 practices (5.1; 5.1.1; 5.1.2; 5.1.3; 5.1.4; 5.2; 5.3; 5.3.1; 5.4; 5.5; 6.1; 6.1.1; 6.2; 6.4; 7.2; 7.4; 7.4.2; 7.5; 8.1; 8.2.2; 8.4.1) - Broadly observed: 2 practices (6.1.5; 8.4) - Partly observed: 3 practices (6.3; 7.1; 7.4.1) - Not applicable: 10 practices (6.1.2; 6.1.3; 6.1.4; 7.3; 7.3.1; 7.6; 7.7; 8.2; 8.2.1; 8.3) ### Recommended action plan — key, recurring recommendations - Improve accessibility and explanation of BE’s main objectives for banking supervision: - Make objectives more explicit on the Banking Supervision webpage. - Ensure clear linkage between legislative objectives and operational communications in annual reports and website material. - Enhance website content and language coordination: - Update and coordinate English- and Spanish-language websites for BE and CNMV; include clear references to publications and indicate “in Spanish only” where applicable. - Reorganize and improve presentation of BE circulars because of many modifications. - Increase public disclosure of cooperation instruments: - Make public the content of all MoUs with other agencies, not only the year they were signed. - Make consultation procedures between domestic agencies public to provide assurances on cross-cutting mechanisms. - Improve governance transparency and conflict-of-interest disclosures: - Publish the internal Code of Conduct (BE) and other internal governance procedures (Funds) to strengthen confidence. - Disseminate information (other than legislation) on internal governance procedures and standards of conduct of personal financial affairs for Funds. - Payment systems oversight: - Issue a periodic report on payment systems including oversight objectives and activities; mention oversight activities in BE’s Management Report. - Update the payment systems section of the BE website (e.g., remove outdated SPI references) and post intended publications calendar where useful. - CNMV specific: - Publish texts of senior officials’ speeches (President’s parliamentary statements). - Publish internal procedures under development after formal approval; include notes to financial statements in annual report. - Improve timeliness and clarity of CNMV responses on rule interpretation when requested. ### Authorities’ response and implementation status - Authorities broadly agreed with the assessment and noted statutory allocations of responsibilities among State and ACs. - Bank of Spain initial action plan (first phase) includes: - Improving consistency between Spanish and English web pages. - Adding institutional information such as internal code of conduct for employees and Governing Council members and their CVs. - Reorganizing and developing website contents under bank supervision. - CNMV actions and considerations: - Documents interpreting CNMV rules posted on website. - New communications section being set up to contain speeches and statements of CNMV senior officials. - Consideration underway for publishing MoUs, internal procedures, and notes to financial statements. - Payment systems and Funds: - Authorities broadly agree and appropriate measures are being implemented to tackle recommended action plan; specific steps include improved web disclosure and consideration of publicization of MoU contents and governance documents. *Source: _cr06223 - IMF staff report excerpts (assessment undertaken June-July 2005).* ### 1. Observance of IMF's MFP Transparency Code—Banking Supervision .............................6 ### 1. Observance of IMF's MFP Transparency Code—Banking Supervision ### Information and Methodology Used for Assessment - Assessment carried out as part of the Financial Sector Assessment Program (FSAP) against the IMF Code of Good Practices on Transparency in Monetary and Financial Policies (MFP Transparency Code). - Assessment period: undertaken during June-July 2005; the author of the assessment was Camilla Ferenius (Bank of Sweden), and the assessment was carried out from June 22 to July 1, 2005. - Coverage: primarily the Bank of Spain (BE); transparency in the institutional framework also covers the Ministry of Economy and Finance (ME) and the Autonomous Communities (ACs). - Evidence base: - (a) relevant laws; - (b) information on the BE website; - (c) BE’s and bank supervision annual reports and other publications; - (d) responses to a pre-FSAP questionnaire; - (e) extensive discussions with officials of the financial agencies; and - (f) discussions with commercial banks and bankers’ associations. - Spanish authorities cooperated fully and provided necessary clarifications and documents. ### Institutional and Market Structure - Supervisory authority: Directorate General of Supervision (DGS) performs the BE supervisory function relating to banks under directions of the Governing Council on the legal basis of the Law of Autonomy of the Bank of Spain (Law 13/1994, LABE). - Legal framework for supervisory responsibility and authority further defined by the Law on Discipline and Intervention of Credit Institutions (Law 26/1988, LDI). - The BE’s Internal Regulations (RIBE) are disclosed on the website. - Institutions under BE supervision: - commercial banks; - savings banks (cajas de ahorros); - credit cooperatives; - specialized credit institutions; - electronic money issuers; - subsidiaries and branches of foreign credit institutions. - Governing Council composition: Governor, Deputy Governor, six members elected by the government, Director General of Treasury and Financial Policy (ME), and Vice President of the National Securities Market Commission (CNMV). BE director generals and a staff representative attend Council meetings in a nonvoting capacity. - Communications function: - Communications Department disseminates policy decisions and announcements, provides information on operating framework and objectives, publishes major speeches, data, and research reports, arranges seminars, and maintains media contacts. - BE website (www.bde.es) contains general information, legislation and regulation, statistics, publications; available in Spanish and English. ### Practice-by-Practice Assessment: Method and Ratings - Five-part assessment system used: Observed; broadly observed; partly observed; not observed; not applicable. - Observed: full observance or with insignificant shortcomings. - Broadly observed: minor weaknesses not seen as significant. - Partly observed: shortcomings sufficient to raise doubts about achieving observance. - Not observed: practice not being observed; no substantive progress recorded. - Not applicable: practice not applicable given country circumstances. - The detailed assessment recognizes heterogeneity in legal and institutional frameworks across countries and assesses observance based on laws, regulations, and practices. ### Clarity of Roles, Responsibilities, and Objectives of Financial Agencies (Table 1 — selected findings) - Practice 5.1: The broad objective(s) and institutional framework of financial agencies should be clearly defined, preferably in relevant legislation or regulation. - Description highlights: - LABE (Law 13/1994) states the Bank is an institution under public law with autonomy and an integral part of the European System of Central Banks (ESCB). - LABE preamble and Art. 7 emphasize price stability as a priority objective and coordination with government economic policy; Art. 24 assigns to the government exclusive responsibility for appointing Bank governing bodies. - LDI (Law 26/1988) Art. 43 bis (25) assigns responsibility for overseeing and inspecting credit institutions to the Bank of Spain, extending to offices inside or outside Spanish national territory and to companies belonging to the group of the affected credit institution. Article 43 bis LDI also defines the BE role regarding inspections of branches authorized in other European Community member states. - Institutional framework and DGS organization/functions are disclosed on the BE website under Functional Structure. - Regulatory responsibility for the financial system is principally held by the ME through the Directorate General of Treasury and Financial Policy; the BE can be delegated regulatory powers via Royal Decrees and Orders and may issue “Circulares” under Article 3 LABE. - Regional governments (ACs) have regulatory and supervisory powers for savings banks in their regions; statutes and savings bank laws specify ACs’ roles. - Assessment: Observed. - Practice 5.1.1: The broad objective(s) of financial agencies should be publicly disclosed and explained. - Description highlights: - Art. 7.2 LABE defines BE objectives: “Without prejudice to its main objective of maintaining price stability and fulfilling its duties as a member of the ESCB in accordance with the terms of Article 105.1 of the Treaty, the Bank shall support the general economic policy of the government.” - Financial stability is not listed as a principal objective but is mentioned among the Bank’s functions; Art. 7.3 specifies participation in ESCB functions including “to promote the smooth functioning of the payment system.” Art. 5.b states the Bank shall “promote the smooth operation and the stability of the financial system and, without prejudice to the terms of 3.d) above, of national payment systems.” Responsibility to supervise banking institutions is stated in Art. 7.6. - Website and publications: Banking supervision objective appears on the website (/About us/ Functions of the Bank of Spain /Banking Supervision/) and in Memoria Anual de Supervisión 2003/Banking Supervisión 2003 (p. 76) mentioning “(...) with the principal objective to safeguard the stability of the financial system.” - Legislation is published in the State Official Gazette (BOE) and disclosed on www.bde.es/legislation. - ME’s website states role of “financial policy management and development, along with drawing up and processing of provisions related to financial and credit institutions, etc.” - ACs’ supervisory objective for cajas is to ensure compliance with laws and regulations; examples appear on regional websites (e.g., Valencia www.gva.es/ivf/). - Assessment: Broadly observed. - Comments: Main objectives of the BE regarding banking supervision are only briefly mentioned in the annual report and the website and not explicitly in legislation; disclosure should be more easily accessible and better explained (e.g., on the Banking Supervision webpage). - Practice 5.1.2: The responsibilities of the financial agencies and the authority to conduct financial policies should be publicly disclosed. - Description highlights: - Art. 7 of LABE sets out the Bank’s functions and responsibilities, including exercising functions assigned by law and participating in ESCB functions. - Quoted LABE text: “1. The Bank shall be responsible for exercising the functions assigned to it by this law and any other functions which it might be assigned by other laws. 2. Without prejudice to its main objective of maintaining price stability and fulfilling its duties as a member of the ESCB in accordance with the terms of Art. 105.1 of the Treaty, the Bank shall support the general economic policy of the government (...). 3. The Bank shall participate in the fulfillment of the following basic functions attributed to the ESCB: (...)” - Assessment: (Assessment text continues in source beyond provided excerpt.) ### Key Recommendations and Actionable Findings (extracted from assessments and comments) - Improve accessibility and explanation of the BE’s main objectives for banking supervision: - Make objectives more explicit on the Banking Supervision webpage. - Ensure clear linkage between legislative objectives (where present) and operational communications in annual reports and website material. - Continue and maintain public disclosure of institutional framework, functions, and organizational structure (DGS) on the BE website and in official publications. - Maintain coordination and clarity regarding delegated regulatory powers (Royal Decrees, Orders, and BE Circulars) and the ME’s principal regulatory role. *From: 1. Observance of IMF's MFP Transparency Code—Banking Supervision (assessment undertaken June-July 2005).* ### 6. The Bank shall supervise, in accordance with existing regulations, the solvency activities ### 6. The Bank shall supervise, in accordance with existing regulations, the solvency activities and compliance with specific regulations of credit institutions, and any other financial institution or market it has been called on to oversee, without prejudice to the prudential supervision of Comunidades Autónomas in their areas of responsibility, and the cooperation between these Comunidades Autónomas and the Bank in performing such regional supervisory tasks. ### Supervisory responsibilities and institutional framework - The regulatory responsibility for the financial system is principally held by the Ministry of Economy and Finance (ME) through the Directorate General of Treasury and Financial Policy. - Only in specific areas are regulatory powers delegated to the BE or the CNMV through Royal Decrees (central government) and Orders (ministry). Within these areas the BE can issue Circulars. - Article 3 LABE: “to correctly fulfill its other responsibilities, it may adopt any regulations that it deems necessary to develop legislation for which it has been expressly empowered. These regulations shall be called Circulares.” - The LDI defines the institutional framework, responsibility and authority for banking supervision in Article 43 bis (25). - Specific responsibilities and functions of the DGS are disclosed on the website under Functional Structure/Supervision. - Savings banks (cajas) are regulated and supervised by the central bank as well as the respective AC. The regulatory and oversight powers of individual ACs are determined by their specific Estatutos de Autonomía. - Typical AC powers regarding cajas include: - Regulating the internal organization of the cajas within national fundamental norms. - Approval of mergers and sales of assets and liabilities. - Appointment and removal of members of governing bodies. - Approval of plans for the social work (obra social) of the cajas. - Imposing sanctions when law infringements are detected. - Authorization of cajas. - Bank licenses are granted and removed by the ME upon the recommendation of the BE. - Assessment: Observed. - Comment: “Transparency would be enhanced if legislation and regulation of the cajas by the ACs were more easily accessible on the websites.” ### Accountability, reporting and public disclosure - Art. 10 LABE requires the BE to report on monetary policy to parliament and the government: - “1. The Bank shall regularly inform Parliament and the government of the objectives and the implementation of monetary policy, without prejudice to the terms of Article 107 of the Treaty and the ECB rules on professional secrecy. To this end, the Governor of the Bank may be asked to appear, in accordance with Parliamentary regulations, before any Congress or Senate committee or joint committee of both chambers, or be asked to attend for this purpose cabinet meetings or meetings of its Commission for Economic Affairs. 2. In addition, the Governor of the Bank may be asked to attend the meetings of the Consejo de Política Fiscal y Financiera de las Comunidades Autónomas referred to in Article 3 of Organic Law 8/1980, of September 22, on Financing of Autonomous Communities and to report on issues within the scope of the Bank’s authority, with a view to facilitating the tasks of financial coordination of the above-mentioned Consejo.” - Arts. 4 of LABE and 33 of RIBE: - Government, upon proposal by the Minister of Economy and Finance, approves annual balance sheet and accounts of the Bank; these will be sent to Parliament for informational purposes. - The Bank shall be subject to external auditing by the National Audit Office under Organic Law on the National Audit Office (Law 2/1982 of May 12, 1982). - The report accompanying the annual balance sheet and accounts shall detail Bank contributions to the Deposit Guarantee Funds and any loans or other operations transacted for the benefit of any other institution or person not on an arm's-length basis, specifying amounts of loss of profit or losses. - Art. 21.1c: “the Governing Council shall approve, at the proposal of the Executive Commission, the annual report of the Bank and, as relevant, any other reports which the Bank must submit to Parliament, to the government or to the Economy and Finance Minister.” - The BE publishes: - An annual complaints report (Memoria del Servicio de Reclamaciones). - A special annual report on the supervisory function (Memoria de la Supervisión Bancaria en España). - Financial Law (Law 44/2002, DA 2ª, 2) requires the supervisory annual report to contain information on activities, efficiency and an internal audit report; approval by the governing board and submission to government and parliament. - LDI (Art. 8): “The Bank of Spain shall send an annual report to the Spanish parliament on the actions which have given rise to very serious sanctions and to interventions or substitutions under Title III of this Law.” - Art. 32.1: “The intervention or substitution measures referred to by the preceding article shall be resolved by the Bank of Spain, giving a reasoned explanation of their adoption to the Minister of Economy and Finance.” - All annual reports and speeches of the governor are publicly available on the BE website. - Assessment: Observed. ### Appointment, terms, incompatibilities and removal of governing bodies - Arts. 24 and 25 of LABE establish procedures for appointment, terms, and criteria for removal. - Art. 24: - BE Governor appointed by the King following a proposal by the head (President) of government. - Nominees shall be Spanish and have recognized competence in monetary and/or banking matters. - Prior to the appointment the Minister of the ME shall appear before the relevant parliamentary committee (Art. 203 Spanish Parliamentary Internal Regulations). - Deputy Governor appointed by the government following a proposal by the Governor and must meet same conditions. - Six elected Council members appointed by the government following a proposal by the Minister of the ME, after consultation with the Governor of the BE; must be Spanish and have recognized competence in the area of economy or law; serve a six-year term and can be reappointed once (Article 25.2 LABE). - Art. 25: - “The terms of office of the Governor and the Deputy Governor will be simultaneous, for a period of six years, and non-renewable for the same position. Elected Council members will serve a six-year term and may be reappointed once.” - Reasons for leaving office include: a. “Expiration of their terms of office.” b. Resignation (effect upon notification to government or Governing Council). c. Reaching 70 years of age. d. Dismissal decided by the government, due to permanent incapacity, serious lack of compliance with obligations, incompatibility arisen during term, or prosecution for deliberate crimes. - Art. 26 defines incompatibilities: 1. Governor and Deputy Governor subject to incompatibilities applicable to senior officials; incompatible with exercise of any public or private profession or activity unless inherent to status or imposed as part of role; for two years after term they may not engage in professional activity linked to credit institutions or securities markets. 2. Elected Council members may not be involved in professional activities linked to credit institutions, securities markets or private financial institutions during their terms; serving on Bank Council compatible with teaching and research activities. - No special rules for the Director General of Banking Supervision; LABE Art. 6 (secrecy) and Art. 26.2 (other professional activities) apply to all general directors (Art. 30). - All mentioned legislation and RIBE made public in the State Official Gazette (BOE) and available on the BE website. - Assessment: Observed. ### Relationship and cooperation among financial agencies - Supervision allocation: - Bank of Spain (BE) for credit institutions (LABE). - CNMV for securities markets (Securities Market Law, Law 24/1988, LMV). - Directorate General of Insurance and Pension Funds (DGSFP) under State Secretary of Economy for insurance companies and pension funds. - ACs have regulatory and supervisory powers with respect to saving banks located in their region. - Legal bases for inter-agency relations and cooperation: - Art. 7.8 of LABE: BE may establish relationships with other central banks, financial supervisory authorities, financial institutions in other countries, international monetary and financial organizations, public financial institutions and regional financial supervisory authorities. - Financial Law (DA 2 Law 44/2002) obliges cooperation between BE, CNMV and ME to harmonize supervision practices and exchange relevant information. - Art. 88 of LMV recognizes BE–CNMV relationship. - Art. 12.3 of Law 13/1992 describes cooperation between banking and insurance supervisors relating to conglomerates (grupos mixtos). - Arts. 17 of LMV and 20 of LABE provide for cooperation and information exchange through cross-membership in governing bodies (e.g., BE deputy governor is a member in the CNMV council). - Agreements and memoranda: - BE signed agreements with CNMV (June 9, 2004) and DGSFP (March 12, 2004); published in the 2004 annual report on supervision. - BE has signed various agreements and memoranda of understanding on information exchange with other supervisors, especially in Latin America. - Relationship with Autonomous Communities: - Art. 43 bis.8 of LDI, Art. 7.6 and 8 of LABE, and DA 1ª a. 3 of Law 31/1985 (LORCA) relate to ACs’ regulatory and supervisory authority on savings banks. - Quoted statutory clause: “The BE shall supervise, in accordance with existing regulations, the solvency activities and compliance with specific regulations of credit institutions, and any other financial institution or market it has been called on to oversee, without prejudice to the prudential supervision of autonomous communities in their areas of responsibility, and the cooperation between these autonomous communities and the Bank in performing such regional supervisory tasks.” - Assessment: Broadly observed. - Comment: “While the cooperation between the BE and the ACs appears to be effective, it is advisable to minimize those circumstances where overlapping national and regional legal frameworks may cause conflicts, particularly in the application of supervisory or sanctioning authority.” ### Transparency of conduct of policies and procedures - LDI specifies measures and actions to be taken by banking supervisors. - BE publishes: - Annual report on supervision. - Annual report of the BE (which from 2003 includes a management report with banking supervision and regulation activities). - Annual report on complaints. - Functions described on BE website/About us/Functions/Banking Supervision. - ME discloses regulations on website www.meh.es and information on regulation in progress. - Assessment: Broadly observed. - Comment: “Transparency would be enhanced if legislation and regulation relating to ACs were more easily accessible on the websites.” ### Specific transparency elements and regulatory disclosure - 6.1.1 Regulatory framework and operating procedures: - LABE Art. 7.6 discloses regulatory framework governing conduct of financial policies. - LDI specifies measures and actions for banking supervisors. - Art. 3 LABE: Bank adopts necessary regulations called “Circulares Monetarias” and “Circulares”; both published in the BOE. - Legal and regulatory framework posted on website (LABE, LDI, RIBE). - Risk-based supervision concept described in 2003 annual report on supervision (Spanish only). - Assessment: Observed. - Recommendation: Post 2001 annual report on supervision material on the website and consider translating into English. - 6.1.2 Regulations for financial reporting: - BE Circular 4/2004 regulates public and confidential information provided to the supervisor and models of financial statements and has adapted the Spanish accounting regime to the IASB. - Changes are made after public debate with affected sectors and published by the BE. - Assessment: Observed. - 6.1.3 Regulations for organized financial markets: - Assessment: Not applicable (CNMV publishes these). - 6.1.4 Fee disclosure: - Assessment: Not applicable (BE as supervisor does not charge fees to financial institutions). - 6.1.5 Formal procedures for information sharing and consultation: - DA 2ª.3 of Financial Law (Law 44/2002) establishes possibility of cooperation between national supervisors. - BE signed agreements with CNMV (9.6.2004) and DGSFP (12.3.04); published in 2004 Annual Report of Supervision. - RDL 1298/1986 and EU Directives support memoranda of understanding with other countries. - Articles 43.2 and 58.2 of LDI require consultations by the BE with relevant foreign supervisors in case of opening subsidiaries in Spain and acquisition of significant holdings by European credit entities. - BE exchanges monthly reports with each AC, including balance sheets, P&L statements, sanctions, supervisory actions, on-site findings; occasionally joint on-site examinations. - Article 43.8 LDI and Article 3 LORCA establish possibility to sign agreements between the BE and the ACs but “there are no formal arrangements for information exchange.” - BE signed EU protocol (2001) on cooperation between agencies responsible for payment system oversight and banking supervision; signed a memorandum in 2003 establishing principles for cooperation in crisis management between national central banks and banking supervisors in the EU; both communicated to the public through ECB press releases, translated into Spanish by the BE and posted on ECB and BE websites. - Spain entered into cooperative agreements between central credit registers with other European countries; made public in management report section of the annual report for corresponding year. - BE and ECB exchange accounting information pursuant to Orientation BCE/2002/NP9 on procedures of elaboration of financial reports in the ECB system; the Orientation is not publicly available. - Assessment: Broadly observed. - Comment: “In order to get an observed rating, the content of the MoUs should be made public, not only their existence. Knowledge of consultation procedures among agencies provides the public with assurances that financial agencies have established mechanisms to deal with regulatory issues and financial problems that cut across the mandates of different agencies.” *Source: _cr06223 - 6. The Bank shall supervise, in accordance with existing regulations, the solvency activities and compliance with specific regulations of credit institutions, and any other financial institution or market it has been called on to oversee (extracted content).* ### 6.2 Significant changes in financial policies should be publicly announced and explained in a ### _cr06223 - 6.2 Significant changes in financial policies should be publicly announced and explained in a ### Public announcement and explanation of significant financial policy changes (6.2) - Description: The BE publicly announces and explains significant changes in financial policies (banking legislation and regulation) through the Annual Report, the website, notas informativas, monthly publications, and press releases. Major changes are published in the BOE the day following such decisions. The BE has a Q&A system on the website where questions from the public are answered. - Assessment: Observed. ### Periodic public reporting on policy objectives and sector developments (6.3; 7.1; 7.4.1) - Description (6.3): The BE elaborates a specific Annual Report on Supervision (Memoria de la Supervisión Bancaria en España), including its functions, activities and procedures, and including an internal audit report on the appropriateness of decisions taken. This report (2001, 2002, and 2003) is complemented with notes on the financial stability and official periodic notes on relevant subjects such as structure and evolution of the institutions, regulatory changes, and disciplinary proceedings initiated and resolved. Banking supervision activities are also described in the management report section of the BE’s annual report. The section describes how financial policy objectives were pursued, including supervisory measures such as placing under administration and imposing sanctions. - Description (7.1): The annual report on supervision includes a chapter on “the structure and development of the entities under BE supervision” (http://www.bde.es/informes/be/supervi/2003/cap1.pdf). Twice a year the BE also publishes a financial stability report (www.bde.es/informes/be/estfin/estfin.htm). In annual report of the be analyzes financial development in Spain, intermediaries, and markets (www.bde.es/informes/be/infanu/2003/cap5.pdf). Finally, the BE also analyzes the entities it supervises and publish the analyses in the relevant Economic Bulletins (Boletines Económicos). All the publications are available on the BE website. - Description (7.4.1): The publications program was established in the Resolution March 28, 2000 of the BE governing board. The BE has a publications program with periodic reports including: - monthly evaluation of the general economic situation (Boletín Económico), - evaluation of national financial stability (Estabilidad Financiera), - official statistics (Boletín Estadístico, Cuentas Financieras de la Economía Española, Balanza de Pagos, Central de Balances, Indicadores Económicos), - bank supervision activities (Memoria de la Supervisión Bancaria), - public debt management operations (Informe Anual del Mercado de Deuda, Boletines Diarios del Mercado de Deuda Pública), - complaints (Memoria del Servicio de Reclamaciones). - The BE annual report, published in June, includes a management report explaining the main activities of the institution and is distributed to the press and to more than 3,200 subscribers, and posted on the website. - Assessments: Observed (6.3, 7.1, 7.4.1). ### Public consultations for substantive regulatory changes (6.4) - Legal basis cited: - Arts. 3.2 of LABE and 8.5 of RIBE: “in the case of the ‘Circulares’ the affected parties should receive a hearing.” - Art. 24 of the Law on Government (Law 50/1997, del Gobierno): procedures of elaboration of regulation (like the BE circulars) in what it refers to how the elaboration should involve the affected sectors. - Practice and procedures: - Legislation is posted on the BE website. - BE website has a specific section reserved for SEBC consultations, available from the main page. - Consultations are held through a public notification and give a certain period (usually not less than three months) to make written comments. The received comments are made public at the end of the consultation period. - Example: BE Circular 4/2004 (international accounting rules) — drafts published in July and October 2004 before formal approval in December. Market participants appreciated the involvement of affected parties, though consultative periods are sometimes considered too short. - Assessment: Observed. ### Public availability of aggregate data, balance sheets, and emergency support information (7.2; 7.3; 7.3.1) - Description (7.2): - Arts. 15 and 16 of Decree Law on the Nationalization and Reorganization of BE (DL18/62, de Nacionalización y Reorganización del BE) and Art 7.5.f of LABE: BE shall “compile and publish statistics related to its functions and assist the ECB in the compilation of the statistical information needed for the fulfillment of the ESCB’s functions.” - All information on financial entities is made public in aggregated form, consistent with confidentiality requirements. This is done in the monthly Boletín Estadístico, as well as in the yearly Memoria de Supervisión. Aggregated statistical information is also published in the Financial Stability Report and in the Annual Report of the BE, all available at the BE website/Estadísticas. - Assessment: Observed. - Description (7.3): - Orientation BCE/2002/10: legal regime for accounting and elaboration of financial reports in the ESCB includes fundamental accounting principles, defines assets and liabilities, rules for composition of the balance and valuation criteria. - BE economic regime: Art. 4 of LABE — procedures for elaboration, approval, and publication of the annual accounts; government approval upon proposal by the Economy and Finance Minister; external auditing by the National Audit Tribunal under Organic Law 2/1982, of May 12; the report accompanying the annual balance sheet shall give further detail on different operations or items on the balance sheet, including contributions to Deposit Guarantee Funds and any loans or operations transacted for the benefit of any other institution or person not on an arm’s-length basis. - Arts. 7 and 29 of RIBE: regulate accounting system and compilation and dissemination of BE’s annual accounts. Art. 29: annual accounts developed by the Departamento de Régimen Interior; audited by internal and independent external auditors; published in the BOE; BE every month should publish a summary balance sheet in the Boletín Estadístico. Art. 33: should be sent to the National Audit Office within two months after government approval. - Assessment: Not applicable. Comment: The DGS is part of the organizational structure of the BE and their funding and expenditures are determined as part of BE’s budget. - Description (7.3.1) — emergency financial support disclosure: - LOLR is given through access to the marginal credit facility of the ESCB. Rules are transparent; no decision is made by the Bank of Spain. Terms are one day. The rate of return is fixed by the European Central Bank (ECB) and unique for the whole euro area. Access conditions are automatic if the entity holds a debtor position vis-à-vis the Bank of Spain at the end of the day. However, the entity must have qualified collateral, and the list of assets (more than €20,000) that qualify as collateral are published and updated weekly by the ECB. - Assessment: Not applicable. ### Public information services, communications, and accessibility (7.4; 7.4.2) - Communications Department functions: - disseminates policy decisions and policy announcements; - provides information on the operating framework and objectives; - publishes texts of major speeches by senior officials, data, and research reports; - arranges seminars and maintains contact with the media. - Instruments and frequency: - Information notes transmitted to more than a hundred recipients by electronic mail and simultaneously posted on the BE website. Some notes are periodic: monthly (balance sheets, mortgage market), quarterly (international investments), half-yearly (Financial Stability Report). In 2004, the BE issued 49 information notes. - The BE holds several events open to the press (~a dozen in 2004) and organizes off-the-record meetings between high-ranking BE officials and specialized press. Technical seminars for the press on topics such as Basel II and new international accounting rules. - Speeches posted on the website: governor (22 in 2004), deputy governor (2 in 2004), director-generals — Supervision 1, Regulation 10, Studies 5 (respectively, in 2004). - Publications for the general public: Monetary Policy Glossary; developing a welcome manual to the BE. - Website: special section under development with practical information for bank clients; includes email, telephone, and fax contacts to receive public questions. - Language and accessibility issues: - Publications relating to banking supervision and regulation and financial markets can be found in Spanish in the Banking Supervision section. The English language website for banking supervision is not updated and does not include any publications. General information on banking supervision in Spain can be found in About us/functions/banking supervision, but not on the Banking Supervision section. - A permanent information source: BE Publications Service. - Assessment: Broadly observed. - Comments and recommendations: - General information on banking supervision in Spain should be more easily accessible and explained on the Banking Supervision main webpage. - The English version website for banking supervision should be updated and include the same references to publications as the Spanish version. Where publications only exist in Spanish, a reference “in Spanish only” could be used. It is recommended to better coordinate the English and Spanish websites, e.g., with respect to published speeches. ### Availability of regulatory texts and organization of circulars (7.5) - Description: The circulars (CBE) issued by the BE (Arts. 3.1. and 16 of LABE; Art. 7 of RIBE) are published in the BOE (Arts. 3 of LABE and 8.9 of RIBE). Legislation affecting the BE (as well as financial entities) is regularly updated on the BE website, in the section “Legislation.” - Assessment: Observed. - Comment: Due to the many modifications of BE circulars it is recommended that the overall organization of BE circulars be updated to improve transparency. ### Deposit insurance, investor protection, and consumer protection disclosure (7.6; 7.7) - Deposit/investor protection (7.6): - Legal basis: RDL 4/1980, RDL 18/1982, and RD 2606/1996 for deposit insurance; RD 948/2001 for investor protection. - The Deposit Guarantee Fund website (www.fgd.es) contains detailed information on deposit guarantee. BE has a website section dedicated to deposit insurance. - Assessment: Not applicable. Comment: This is not the responsibility of the banking supervisor. - Consumer protection and complaints (7.7): - Arts. 22–31 of the Financial Law (Law 44/2002): protection regime for users of financial services. Art. 22 creates a Commission (Comisionado) for the Protection of Clients of Financial Services to attend complaints, reclamations and give advice. Art. 26: obligation for the Commission to produce and publish an annual report including a summary of consultations and complaints; Art. 18 of Order 303/2004 develops regulations for this Commission. - Article 31 of Financial Law 44/2002 and Art. 8.4 of Order ECO/734/2004 give the BE authority to regulate consumer protection arrangements. Chapter II of BE Circular 8/1990 defines the organization and functions of the BE Complaints Service. Arts. 5 e) and 48.2 of LDI establish sanction for lack of transparency in regard to the operations of credit entities. Credit entities should have organs for resolution of conflicts with clients and should inform about this in their annual reports. - The BE Complaints Service issues an annual report, available on the website, describing criteria followed in treatment of conflicts between bank clients and credit entities. - Information on rates of interest charged by credit institutions is available on the BE’s website, including a “Clients corner” section. - Assessment: Observed. ### Accountability and appearances before public authorities (8.1) - Legal basis: Art. 10 of LABE states: - “1. The Bank shall regularly inform Parliament and the government of the objectives and the implementation of monetary policy (...). To this end, the Governor of the Bank may be asked to appear, in accordance with Parliamentary regulations, before any Congress or Senate committee or joint committee of both chambers, or be asked to attend for this purpose cabinet meetings or meetings of its Commission for Economic Affairs. - 2. In addition, the Governor of the Bank may be asked to attend the meetings of the Consejo de Política Fiscal y Financiera de las Comunidades Autónomas (...) and to report on issues within the scope of the Bank’s authority, with a view to facilitating the tasks of financial coordination of the above-mentioned Consejo.” - Practice: - The Governor appears regularly before parliament, usually three times a year. - In 2004 the governor appeared before the Budget Commissions of Congress (Deputies, October 13 and Senate, November 24), as well as before the Economy and Finance Commission (Deputies, June 30) to discuss economic conditions and policy. Appearances are made public in the Diario de Sesiones del Congreso. - The BE, usually through the Governor or a Director General, informs on objectives and performance of its functions. Public speeches by the Governor, Deputy Governor, and Directors General are posted on the website and in some cases included in other BE publications. - Assessment: Observed. - Comment: It is recommended that the English and Spanish websites be better coordinated, e.g., with respect to published speeches. *Source: _cr06223 - 6.2 Significant changes in financial policies should be publicly announced and explained in a (IMF staff report excerpt).* ### 8.2 Where applicable, financial agencies should publicly disclose audited financial statements ### _cr06223 - 8.2 Where applicable, financial agencies should publicly disclose audited financial statements ### 8.2 — Public disclosure of audited financial statements (overview) - Description: - Arts. 4.2 of LABE and 29 and 32 of RIBE establish the obligation to submit the BE accounts, already audited by the Internal Audit Department, to the Audit Committee, external auditors, and the National Audit Office. - The Governing Council submits the annual accounts for government approval, upon proposal by the Minister of the Economy. - The annual accounts of the BE, including notes to the accounts and the audit report, are included in the Annual Report of the BE, issued in June. - Assessment: Not applicable. - Comments: The DGS is part of the organizational structure of the BE; its funding and expenditures are determined as part of the BE’s budget. ### 8.2.1 — Independent audit and disclosure of accounting policies - Description: - Art. 29 and following of RIBE and 4.2 of LABE state that the BE is subject to independent external auditing pursuant to Art. 27 of the statutes of the ESCB. - The external auditors report (see, for instance, the 2003 annual report of the BE, p. 226) contains information on accounting policies and qualifications to the statements. - The annual accounts include balance sheet, income statement, notes to the accounts, and the statement of the independent auditor. - Contributions to the Deposit insurance fund and all operations not at market value are detailed separately in the report (see 7.3.1). - Assessment: Not applicable. - Comments: The DGS is part of the organizational structure of the BE; its funding and expenditures are determined as part of the BE’s budget. ### 8.2.2 — Disclosure of internal governance procedures and internal audit arrangements - Description: - DA 2ª of the Financial Law established measures to improve supervision efficiency and quality, including issuance of an annual report on supervision that should contain an internal audit of the functioning of BE’s governing bodies, focusing on their decisions and the suitability of normative procedures applied. - Articles 29 and 32 of RIBE regulate the Internal Audit Department, and Arts. 79–88 its internal control functions. - The By-laws of the Internal Audit Department, approved by BE’s Executive Commission on November 28, 2001, are made public on the website/About us/Functional Structure/Internal Audit Department. - The activities of the internal audit are disclosed in the management report section of the annual report, under “Internal Organization and Administration.” - Assessment: Observed. - Comments: (none) ### 8.3 — Public disclosure of operating expenses and revenues - Description: - Arts. 4 of LABE and 28 of RIBE specify that the budget, once approved by the Governing Council, shall be forwarded to the government, which will submit it to parliament for approval. - “The budget shall be prospective in nature, and shall not be consolidated with other State public sector budgets. The government, upon proposal by the Economy and Finance Minister, shall have the authority to approve the annual balance sheet and accounts of the Bank, which will be sent to Parliament for informational purposes (...). The report accompanying the annual balance sheet and accounts shall give further detail on different operations or items on the balance sheet, according to their characteristics (...) or which in any other way involve loss of profit or losses for the Bank. In such cases the amount of such loss of profit or losses shall be specified.” See notes of the loss and profit account on p. 118 of the Annual Report 2003. - Assessment: Not applicable. - Comments: The DGS is part of the organizational structure of the BE; its funding and expenditures are determined as part of the BE’s budget. ### 8.4 — Standards for conduct of personal financial affairs and prevention of conflicts of interest - Description (Art. 28 of LABE and related provisions): - Members of the Governing Council must refrain from acquiring or owning goods or rights and from engaging in activities that might compromise independence, impartiality, or cause conflicts of interest; they must contractually entrust administration of tradable securities or financial assets to a financial institution registered with the CNMV under specified restrictions. - In the three months following taking office and the end of their terms, and on an annual basis, members of the Governing Council must file a statement on activities and net worth of themselves, their non-separated spouses, and dependent children; the statement is submitted to the Ministry of Public Administration and inscribed in the Registro de Intereses de Altos Cargos. - Art. 6 bis of LABE: BE staff with access to confidential information shall report securities market operations they carry out; internal rule determines restrictions and reporting obligations. - Art. 6 of LABE, Art. 6 of RDL 1298/1986, and Art. 17 of RIBE: governing bodies and personnel shall keep secret any confidential information received in the exercise of duties; breaches are sanctioned. - The BE Code of Conduct, approved by internal circular BE 10/2002, establishes a duty to annually register financial activities of all staff and their families; the Code of Conduct is not publicly available, but is posted on the internal website. - Assessment: Broadly observed. - Comments: Public disclosure of the Code of Conduct would be desirable. ### 8.4.1 — Legal protections for officials and staff - Description: - The RIBE establishes rules in Art. 25 (protection for BE staff in the conduct of their official duties) and Art. 26 (legal defense). - This has support in Title X of Law 30/1992 (Régimen Jurídico de las Administraciones Públicas y del Procedimiento Administrativo Común) and in Royal Decree 429/1993. - The legislation as well as RIBE are posted on the website. - Assessment: Observed. - Comments: (none) ### Summary of observance (Table 2 highlights) - Observed: 20 practices (examples include 5.1; 5.1.2; 5.1.3; 5.1.4; 6.1.1; 6.1.2; 6.2; 6.3; 6.4; 7.1; 7.2; 7.4.1; 7.4.2; 7.5; 7.7; 8.1; 8.2.2; 8.4.1) - Broadly observed: 4 practices (5.1.1; 5.2; 6.1; 6.1.5; 7.4; 8.4) - Not applicable: 12 practices (5.3; 5.3.1; 5.4; 5.5; 6.1.3; 6.1.4; 7.3; 7.3.1; 7.6; 8.2; 8.2.1; 8.3) - Partly observed: (none listed) - Non-observed: (none listed) ### Recommended Action Plan (excerpt relevant to disclosure and governance) - Key recommendations: - Disclosure of the objectives, regulatory framework, and operating procedures for banking supervision should be made more easily accessible, for instance through posting on the banking supervision main webpage. Translation into English could also be considered. General information on banking supervision can currently be found only in About us/functions/banking supervision. - The English-language website for banking supervision should be updated regularly and include the same references to publications as the Spanish version. Where publications only exist in Spanish, a reference (e.g., “in Spanish only”) could be used. The English- and Spanish-language websites could be better coordinated, e.g., with respect to published speeches. - The Bank of Spain should make public the content of all MoUs with other agencies, not only the year in which they were signed. - Public disclosure of the internal Code of Conduct would strengthen transparency and confidence. - Update the overall organization of BE circulars to improve transparency in the regulatory framework. - Table 3 selected recommendations (practice → recommended action): - 5.1.1: Disclosure of objectives should be more easily accessible, e.g., posting on the DGS main webpage. - 5.2: Minimize circumstances where overlapping national and regional legal frameworks may create uncertainty on respective authority of the BE and the ACs. - 6.1.5: Make content of MoUs public, not only the year signed. - 7.4: Make general banking supervision information more accessible (post on DGS main webpage); improve English-language website consistency and coordination with Spanish site. - 8.4: Public disclosure of the Code of Conduct would strengthen confidence. ### Authorities’ response and initial actions - Authorities broadly agree with the assessment; note that State and ACs have regulatory, supervisory and sanctioning powers within corresponding areas and that laws articulate responsibilities of the BE and ME. - Bank of Spain initial action plan (first phase): - Improving consistency between the Spanish and English versions of their web page. - Adding institutional information, such as the internal code of conduct for employees of the BE and the members of the Governing Council (Consejo de Gobierno) including their CVs. - Reorganizing and developing the website contents under bank supervision. *Source: _cr06223 - 8.2 Where applicable, financial agencies should publicly disclose audited financial statements* ### 5.1 The broad objective(s) and institutional framework of financial agencies should be clearly ### _cr06223 - 5.1 The broad objective(s) and institutional framework of financial agencies should be clearly defined, preferably in relevant legislation or regulation. ### Institutional framework of the CNMV - Legal basis: Capital Markets Law (Law 24/1988, Ley de Mercado de Valores, LMV). - Art. 13: CNMV “is entrusted with the supervision and surveillance of the securities markets and of the trading activities of all individuals and legal persons in these markets, the exercise of the power to sanction them, and other duties attributed to it by this Law.” - Art. 14: CNMV “is a public law entity with independent legal status and full public and private legal capacity... With regard to the National Securities Market Commission, the Government and the Ministry of Economy shall exercise the powers conferred upon them by this Law, with strict respect for its sphere of autonomy.” - Governance: Board composed of: - a president and a vice president appointed by the government based on a proposal by the ME; - the Director General of Treasury and Financial Policy; - the deputy governor of the BE; - three commissioners appointed by the Minister of the ME from among persons of “acknowledged competence on securities market matters” (Art. 17). - Assessment: Observed. ### Broad objectives and public disclosure - Art. 13 objective: CNMV “shall seek to ensure the transparency of the securities markets, the correct formation of prices on these markets, and the protection of investors by promoting disclosure of any information necessary in order to attain these ends.” - Public disclosure channels: - Legislation posted on the website. - Objectives described in the annual report of the CNMV. - Website section "What is the CNMV?" - Assessment: Observed. ### Responsibilities, authority, and regulatory instruments - Art. 84.1 LMV: Defines persons and firms subject to CNMV surveillance, supervision, and sanction regime. - Art. 13 functions reiterated: advise Government and Ministry of Economy and Finance, and propose procedures or regulations as deemed necessary. - Regulatory hierarchy and delegation: - Regulatory responsibility principally held by the ME through the Directorate General of Treasury and Financial Policy. - Delegation to BE or CNMV in specific areas via Royal Decrees (central government) and Orders (ministry). - CNMV may issue Circulars where empowered (Art. 15). - Art. 15: CNMV “may issue any provisions required to implement and enforce the rules contained in the Royal Decrees approved by the Government or in Orders issued by the Ministry of Economy and Finance, provided that such statutory instruments expressly empower it to do so.” - Sanctions: - CNMV imposes sanctions for minor and serious infringements. - Minister of the ME imposes sanctions for very serious infringements based on CNMV proposal (Art. 97). - Assessment: Observed. ### Accountability, appointment, terms, and removal - Public accountability: - Art. 13: CNMV “shall draw up and publish an annual report describing its activities and the general condition of the securities markets.” - Annual report presented to the Parliamentary Committee on Economics, Trade and Finance; President appears before Committee as required. - Economic and financial supervision by the State Comptroller’s Office through the National Audit Office. - Appointment and composition (Art. 17): - President and Vice-President: appointed by government from persons of acknowledged competence, on basis of proposals by the Ministry of Economy and Finance. - Director General of the Treasury and the Deputy Governor of the Bank of Spain: automatic members. - Three Commissioners: appointed by the Minister of Economy and Finance from persons of acknowledged competence. - Terms (Art. 19): “the President, Vice-President, and Commissioners envisaged in Article 17.c) shall hold office for four years. Upon expiration, they may be re-appointed for one further term only.” - Grounds for removal (Art. 20): Expiration; resignation accepted by Government; removal by Government due to serious breach of obligations; permanent incapacity; supervening incompatibility; conviction for a willful criminal offence, following investigation and hearing by the Ministry of Economy and Finance. Same causes apply to Commissioners; Minister of Economy and Finance can accept resignations or decide removals. - Legislation availability: Posted on CNMV website/legislation. - Assessment: Observed. ### Relationships among financial agencies and cooperation - Division of supervision: - BE: supervision of credit institutions. - CNMV: securities markets. - Directorate General of Insurance and Pension Funds (DGSFP) under the State Secretary of Economy: insurance companies and pension funds. - Regulatory responsibility principally with the ME through Directorate General of Treasury and Financial Policy. - Cooperation instruments: - CNMV has signed cooperation agreements with the BE (June 2004), the DGSPF (Sept 2004), and the SEPLAC. - DA 2 of the Financial Law (Law 44/2002): recognizes possibility and obligation to sign agreements between national supervisors to harmonize supervision practices and exchange information. - Cross membership rule: - One representative of a financial agency sits as a member on another regulatory body as a permanent exchange mechanism. - BE Deputy Governor and Director General of the Treasury are members of CNMV board. - Deputy Governor of the CNMV is a member of the BE Governing Board (Art. 20 of LABE). - Representation recognized in Art. 53 of RIBE and Art. 7 of CNMV’s internal regulations. - Autonomous communities: - LMV Art. 84: recognizes surveillance, supervision and sanction powers vested in Autonomous Communities for governing companies of secondary markets in their territory and transactions in securities listed only on such markets; CNMV may enter into agreements with Autonomous Communities to coordinate actions. - Autonomous communities represented in the Advisory Committee of the CNMV. - Assessment: Observed. ### Oversight role with regard to payment systems and SROs - BE: full responsibility for national payment system oversight (LABE). - Iberclear incorporation (April 2003) extended CNMV supervisory powers to include securities transactions in the public debt market previously performed by the BE. - Iberclear governance and supervision: - Art. 44.bis.4 LMV: Iberclear “shall be governed by this Law and its secondary legislation and by a Regulation to be approved by the Minister of Economy on the basis of a report by the National Securities Market Commission, the Bank of Spain. and the Autonomous Regional Governments empowered to regulate securities trading venues by their Statutes of Autonomy.” - Iberclear regulations approved by BE and CNMV; supervision, inspection, and sanctions are responsibility of the CNMV. - Supervisory powers disclosed in the CNMV Annual Report on Activities and on the Iberclear website. - Self-regulatory organization example: - Bolsas y Mercados Españoles (BME) licensed to operate stock exchanges; member-owned, comprises Madrid, Barcelona, Bilbao, Valencia exchanges, MF Mercados Financieros, Iberclear, and BME Consulting. - All members licensed by CNMV; BME must comply with notices and directives issued by CNMV; significant BME rules require CNMV approval prior to adoption. - Book-entry public debt market under BE supervision (Art. 84.1.a). - Assessment: Observed. ### Transparency of policies, procedures, and regulatory instruments - Regulatory framework and disclosure: - LMV explains regulatory framework and measures/actions for CNMV. - CNMV Annual Report on Activities reports supervisory and regulatory activities. - CNMV website “What we do” describes functions and internal regime. - CNMV powers to issue circulars: - Art. 15: CNMV may issue circulars to develop and enforce norms in Royal Decrees or Ministerial Orders when explicitly allowed. - Circulars published in the BOE. - Public consultation and advisory arrangements: - CNMV has an Advisory Committee (~20 members) to issue reports preceding CNMV Circulars and other securities market regulation; fulfills public hearings required by law. - CNMV organizes interviews, press releases, seminars, classes, and maintains an Investor Assistance Office. - Availability of internal procedures: - Full text of internal regulations consultable in legislation section of CNMV website. - Internal procedures under development (since February 2004): internal procedures for entities operating in the securities market (five procedures); securities issuance (five procedures); administration and services (six procedures). These can be published in the BOE if the president of the CNMV so decides. - Comment: The internal procedures under development should be published in the BOE and on the website (compatible with confidentiality considerations and the need to preserve the effectiveness of the CNMV) after formal approval. - Financial reporting and market operation regulations: - Regulations for financial reporting and periodic information posted on website under “Legislation”. - Models (Modelos Normalizados) for public periodic information are available on the website. - Regulations for operation of organized financial markets (laws, regulations, ministerial orders, CNMV circulars) disclosed on CNMV website under Legislación, jurisprudencia y otras normas and published in the BOE. - Comment: Some market participants have requested improved timeliness/quality of CNMV responses on interpretation of certain regulations (e.g., new products); CNMV should provide advice on a timely basis. - Fees: - Regulation and procedures for payment of fees posted on website under Legislación, Jurisprudencia y Otras Normas and What is the CNMV?/ Payment of fees. - Annual report includes a section on fees and their contribution to CNMV profits. - Administrative acts informing persons subject to fees include details on fees, structure, and payment. - Assessment: Observed. ### Information sharing, memoranda of understanding, and public disclosure - Art. 90 LMV: CNMV “shall cooperate with the competent authorities of foreign states and may sign memoranda of understanding... may provide information regarding the management, administration, conduct of business, solvency, and ownership of investment services firms and other registered firms... When the information originates in another member state of the European Economic Area, it may not be disclosed without the express consent of the competent authorities which provided it and, in such cases, solely for the purposes for which consent was given.” - CNMV cooperation agreements: - Agreements with BE, DGSFP, and SEPLAC to support supervisory responsibilities. - Agreement with BE on prevention of money laundering and another on exchange of statistical information. - Contracts of consultation and technical assistance with several Latin American countries. - MoUs with IOSCO, the Forum of European Securities Commissions (FESCO) and the London International Financial Futures Exchange (LIFFE). - These MoUs are made public in the Legislación, Jurisprudencia y Otras Normas section of CNMV’s website; national agreements are not disclosed. - Assessment: Broadly observed. - Comment: Existing treaties with national regulators should be made public. Knowledge of consultation procedures between domestic agencies provides public assurance that financial agencies have mechanisms to deal with cross-cutting regulatory issues. *Source: _cr06223 - 5.1 The broad objective(s) and institutional framework of financial agencies should be clearly defined, preferably in relevant legislation or regulation.* ### 6.2 Significant changes in financial policies should be publicly announced and explained in a ### 6.2 Significant changes in financial policies should be publicly announced and explained in a timely manner. ### Description — disclosure channels and consultative mechanisms - The CNMV publicly announces and explains significant changes in financial policies (including legislation and circulars) through its Annual Report on Activities, the website, and press releases. - Major changes are published in the BOE the day following such decisions. - The CNMV has a Q&A page on its website that replies to queries from the public. - The website contains a “Documents under consultation” section where all legislative projects regarding securities markets that are open to public consultation (both Spanish and international) are disclosed; the time limit for comments and the means to submit comments are specified. - Article 13 of LMV establishes that the CNMV President shall appear in Parliament to report on the agency’s activities and on the situation of the organized financial markets, including the most significant legislative changes during the year; the statement is published in the Diario de Sesiones del Congreso. - LMV (Art. 23) establishes that the CNMV Advisory Committee “shall report on draft general regulations on matters related to the securities markets that are referred to it by the Government or by the Ministry of Economy and Finance, in fulfillment of the principle of consultation of affected sectors during preparation of administrative provisions.” The Advisory Committee has about twenty members representing the securities market (appointment procedures R.G. 504/2003). - The General Directorate of Treasury and Financial Policy (DGTPF) is responsible for sending drafts of Royal Decrees and Ministerial Orders to the CNMV Advisory Committee and has the authority to give audience to affected sectors as it deems convenient. - LMV states that draft CNMV circulars should be sent to the Advisory Committee in fulfillment of the principle of consultation. ### Assessment and comments - Assessment: Observed. - Comments: (none provided in source for this subsection) --- ### 6.3 Financial agencies should issue periodic public reports on how their overall policy objectives are being pursued. ### Description — reports, languages, distribution, and timing - Every year the CNMV issues an Annual Report on Activities and an Annual Report on the Securities Markets. - Both reports are issued in both Spanish and English and distributed to the press, the markets, national and international supervisory authorities, official state institutions, the CNMV Advisory Committee, and the universities. - Both reports are posted on the website section Reports and Publications; access on the web is at no cost. - Before publication there is a public presentation by the CNMV president to market participants and the press. - The reports usually are approved in May of the following year and distributed at the beginning of June. - The Annual Report on Activities describes governing bodies and structure of the CNMV, activities in the securities markets, issuers’ disclosure, takeover bids, authorizations and registrations, supervision activities, and so on. - Every year the CNMV president appears before the Parliamentary Committee on Economics, Trade and Finance to present those reports; this appearance is reported in the Diario de Sesiones del Congreso. - The CNMV publishes an Annual Report on Investor Complaints, available on the website and in hard copy, including statistics and information on complaints procedures. ### Assessment and comments - Assessment: Observed. - Comments: Transparency would be enhanced further with disclosure of the speeches of the CNMV President before Parliament. --- ### 6.4 Presumption in favor of public consultations for substantive technical changes ### Description — advisory committee and public consultation practice - LMV Art. 23 requires the CNMV Advisory Committee to report on draft general regulations on matters related to the securities markets referred by the Government or the Ministry of Economy and Finance, fulfilling the principle of consultation of affected sectors. - CNMV circulars should be sent to the Advisory Committee before approval. - The Advisory Committee has about twenty representatives from the securities market (appointment procedures R.G. 504/2003). - The website’s Documents under consultation posts all legislative projects on securities markets open to public consultation (Spanish and international) and specifies the timeline and procedure for submitting comments. - Market participants have expressed appreciation for authorities’ efforts to involve affected parties in the regulatory process, though the consultative period is sometimes considered too short. ### Assessment and comments - Assessment: Observed. - Comments: (none provided in source for this subsection) --- ### VII. PUBLIC AVAILABILITY OF INFORMATION ON FINANCIAL POLICIES (Sections 7.1–7.7) ### 7.1 Periodic public report on major sector developments (annual and monthly reporting) - LMV Art.13 obliges the CNMV to prepare and publish an annual report describing the general condition of the securities markets and to present it to the Parliamentary Committee on Economics, Trade, and Finance. - The president of CNMV shall appear before the Committee and respond to questions as often as Parliament may require. - The annual report analyzes the primary and secondary securities markets in Spain and the supervised entities; the report is made public in hard copy and on the website in Spanish and English. - The report is distributed to press, markets, national and international supervisory authorities, official state institutions, the CNMV Advisory Committee, and universities; posted on the website section Reports and Publications; access is at no cost. - The report is usually approved in May of the following year and distributed in early June, with a public presentation beforehand. - Every month the CNMV elaborates a short report on general developments in the money markets. - The CNMV publishes a monthly bulletin, The CNMV Informs, describing movements in CNMV registers (operations of entities, issuance of securities, etc.). - Daily information is available on the website in real time. - Both periodic and ad hoc documents and statistics are publicly available on the website section Publications and other documents. Assessment and comments: - Assessment: Observed. - Comments: The website could include a calendar for publications to inform the public when different publications and statistics will be published. ### 7.2 Public reporting of aggregate data consistent with confidentiality - The Official Register of the CNMV collects public financial and other issuer information (audit reports, half year and trimester information, annual reports, significant participants, relevant facts, pamphlets, fees, contract-types, etc.); it is available on the website. - The CNMV publishes the annual accounts together with audit reports of issuers on the web page (Relevant Facts). - CNMV publishes statistical reports with aggregated financial and economic information, and operations in the primary and secondary capital markets. - All information on securities markets and entities is made public in aggregated form, consistent with confidentiality requirements, in the monthly Bulletin and the Annual Report. - Aggregated statistical information is published on the CNMV website/Publications; the annual report contains aggregated data for previous years to facilitate comparisons. Assessment and comments: - Assessment: Observed. - Comments: According to some market participants, quarterly aggregated data is already outdated by the time it is published—generally six weeks after the reference period. ### 7.3 Public disclosure of agency balance sheets and, after a predetermined interval, aggregate market transactions - The CNMV budget is published on the website of the Comptroller General of the State Administration (Intervención General de la Administración del Estado). - Art. 13 of LMV requires the CNMV to present a report on its activities and on the situation in organized financial markets to the Parliamentary Committee; the President shall appear to respond to questions as often as Parliament may require. - Art. 24 of LMV states that “together with the financial statements for the year, the Board of the National Securities Market Commission shall submit, for Government approval, a proposal for the distribution of surplus (...).” - The annual report, which includes the annual accounts and the audit report, is published in June of the following year and includes information on administration of CNMV, main sources of profit and loss, and human resources; the report is widely presented and disseminated. - Within a month of board approval of the annual accounts, it is published in the BOE. - The CNMV does not engage in market transactions. Assessment and comments: - Assessment: Observed. - Comments: (none provided in source for this subsection) ### 7.3.1 Aggregate information on emergency financial support - Description: (none) - Assessment: Not applicable. - Comments: Emergency financial support is not given by the CNMV. ### 7.4 Public information services — organizational responsibilities and web presence - Main CNMV organs responsible for public information services: - Direction of Studies and Statistics: elaboration, publication, promotion and distribution of Annual Report on Activities, Annual Report on the Securities Markets, market studies, statistical information, weekly bulletin The CNMV Informs; organization of public events such as seminars and conferences. - Communications Cabinet: dissemination of messages to the public, press releases, relations with the press, arranging interviews with senior CNMV officers. - General Secretariat: maintains the Official Public Register (consultable on the website, at CNMV offices open weekdays 8:30 to 17:30, or by mail and fax); administers the Investor Complaints Service and the CNMV website. - General Directorate of Markets and Investors: informs the public about securities markets and participating entities; educates investors through classes; administers Investors Corner section of website; runs the Investor Assistance Office; elaborates Investor Guides for non-specialized audiences. - The CNMV publicly discloses and explains the regulatory framework and operating procedures through the Advisory Committee; all new legislation is published in the BOE. - The CNMV website (www.cnmv.es) includes information on CNMV’s functions, securities markets legislation, relevant facts, the official register, press releases, investors’ corner, activities, and publications; the website is available in Spanish and English. Assessment and comments: - Assessment: Observed. - Comments: (none provided in source for this subsection) ### 7.4.1 Publications program and periodic activity report - CNMV issues an Annual Report on Activities and an Annual Report on the Securities Markets (see 6.3 and 7.1). - Both reports are in Spanish and English, posted under Reports and Publications on the website; access on the web is at no cost. - Public presentation by the CNMV President occurs prior to publication; reports usually approved in May and distributed at beginning of June. - Monthly short reports on money markets; monthly bulletin The CNMV Informs; daily real-time website information. - Periodic and ad hoc documents and statistics are publicly available on the website under Publications and other documents. - The CNMV publishes the Annual Report on Investors Complaints; starting in 2005 it is issued three times a year (previously yearly). Assessment and comments: - Assessment: Observed. - Comments: (none provided in source for this subsection) ### 7.4.2 Senior officials’ communication and release of statements - Senior CNMV officers explain objectives and performance through: public hearings before Parliamentary committees (Art. 13 of LMV); formal/informal speeches; media interviews; articles in business publications; and publications like annual reports. - To date there has been no presumption in favor of releasing the text of their statements on the website. Assessment and comments: - Assessment: Broadly observed. - Comments: There should be a presumption in favor of releasing the text of public statements by senior financial agency officials. The speeches could be posted on the website. ### 7.5 Availability of texts of regulations and directives - Texts of regulations and generally applicable directives and guidelines are available to the public through official publications, the Annual Report, and the website under Legislación, Jurisprudencia y Otras Normas. - New legislation is also published in the BOE. - CNMV Circulars and Resolutions are posted on the website; European Community legislation is on the website under Normativa Comunitaria. Assessment and comments: - Assessment: Observed. - Comments: (none provided in source for this subsection) ### 7.6 Disclosure of deposit insurance and investor protection schemes - The Investor Protection Scheme (Fondo de Garantía de Inversiones, FGI) was created in 2001 (R.G. 948/2001) and offers coverage up to a maximum of €20,000 per investor. - The Fund is administrated by a management company supervised by the CNMV. - The FGI is disclosed in CNMV’s Annual Report in a dedicated section that includes information on contributions and performance. - On CNMV’s website under Investor Corner, there is a link to the FGI website, which describes the scheme, contains the legislation, and indicates procedures for execution of the guarantee; financial information is not disclosed on the website. Assessment and comments: - Assessment: Observed. - Comments: The FGI website, set up in 2003, could include more information on the nature and form of the guarantee, including operating procedures, how the guarantee is financed, and the performance of the arrangement. ### 7.7 Disclosure of consumer protection arrangements and complaints processes - The CNMV Investor Complaints Service attends complaints from investors who consider integrity of their investments has been damaged by conduct of supervised entities or persons. - Investors Corner on the CNMV website includes a section on Warnings detailing rules and procedures for investor protection and complaints related to securities markets. - The Reclamations to the CNMV section contains steps to present a complaint and procedures CNMV follows to attempt to resolve conflicts. - The CNMV publishes a quarterly (until 2005 yearly) Report on Complaints with analysis and statistics. - The Annual Report on Activities includes a section on the complaints service with statistics on entities against which reclamations are made, types of reclamations, and outcomes. Assessment and comments: - Assessment: Observed. - Comments: (none provided in source for this subsection) *Source: _cr06223 - 6.2 Significant changes in financial policies should be publicly announced and explained in a* ### 8.1 Officials of financial agencies should be available to appear before a designated public ### 8.1 Officials of financial agencies should be available to appear before a designated public ### Appearances of CNMV officials before Parliament - Legal basis: Art. 13 of LMV establishes that “each year, the National Securities Market Commission shall present a report on its activities and on the situation of the organized financial markets to the Parliamentary Committee on Economics, Trade, and Finance. The President of the National Securities Market Commission shall appear before the aforementioned Parliamentary Committee to respond to questions on the report as often as the Parliament may require.” - Practice: Appearances occur 2-3 times a year. - Transparency of appearances: The appearances are made public in the Diario de Sesiones del Congreso. - Assessment: Observed. ### Public disclosure of audited financial statements (8.2) - Accountability framework: - As a public entity, the CNMV annually has to account to the National Audit Office. - Financial statements are audited by the Comptroller General of the State Administration (IGAE). - The IGAE report is done in April-May of the following year. - The Annual Report on Activities, which includes the annual accounts and the audit report, is published in June of the following year. - Within a month after their Board approval, the annual accounts are published in the BOE. - Legal requirement: Art. 24 of LMV states that “together with the financial statements for the year, the Board of the National Securities Market Commission shall submit, for approval by the Government, a proposal for the distribution of surplus and an explanatory report (...).” - Content of published reports: - Annual Report describes main information on the administration of CNMV as well as the sources of profit and loss and human resources. - The Annual Report on Activities includes balance sheet, income statement, and audit report. - Assessment: Observed. ### Audit independence and accounting disclosure (8.2.1) - Accounting framework: - CNMV follows Title V “Accounting in the Public Sector” of the General Budget Law and the General Public Accounting Plan; these are published in the BOE. - Audit process and publications: - Annual accounts information in the Annual Report incorporates the IGAE audit report and any qualification to the statements. - The notes to the accounts are not included in the Annual Report. - The IGAE sends the annual accounts and audit report to the National Audit Office within one month of issuance of the report. - The National Audit Office report on the annual accounts, including any qualification to the financial statements, is published in the BOE. - Assessment: Observed. - Comment / Recommendation: It is recommended that the notes to the financial statements be included in the annual report. ### Internal governance and internal audit disclosure (8.2.2) - Internal governance framework: - Internal Regulation (RRI) approved by the board in July 2003 and published in the BOE; also available on CNMV’s website. - Annual Report on Activities contains detailed description of organization and responsibilities of divisions (Governing bodies and the structure of CNMV). - Internal Control Body issues an annual “Oversight Report on Compliance by CNMV’s governing bodies to Procedural Standards” pursuant to D.A. 2 of the Financial Law (Law 44/2002); this report is included in the Annual Report. - Internal audit arrangements: - Internal Control Department reports to the Executive Committee; its functions are established in the RRI. - Internal audit norms were approved by the board in December 2004 and are in line with the Institute of Internal Auditors’ (IIA) International Standards for the Professional Practice of Internal Audit. - Assessment: Observed. ### Operating expenses and revenues disclosure (8.3) - Reference: See 7.3, 8.2 and 8.2.1. - Published information: - Annual accounts in the Annual Report on Activities include balance sheet, income statement, and audit report. - The Annual Report section “Administration and Resources” analyzes the composition and evolution of the principal incomes and expenditure items. - Assessment: Observed. ### Standards for personal financial conduct and conflicts of interest (8.4 and 8.4.1) - Applicable rules and publications: - LMV sets incompatibilities and secrecy rules. - RRI and the General Code of Conduct (CGC) are applicable to CNMV officials and cover incompatibilities, secrecy, operations in the market, and conflicts of interest. - RRI is published in the BOE and both RRI and CGC are available on the website. - CGC (2003) further develops principles relating to conduct, privileged information, prevision of conflicts of interest, and responsibilities of CNMV staff; it covers most dispositions of Order APU/516/2005 on Good Governance (applies to senior officers). - A section “Code of Conduct for CNMV Staff and Executives” is included in the Annual Report on Activities. - Legal protections for officials: - RRI and CGC include information on the juridical support that the CNMV grants officers in case of legal actions against them for actions taken in the conduct of their official duties; both documents are available on the website. - Assessment: Observed. ### Summary observance statistics (Table 5) - Practices Grouped by Assessment Grade: - Observed: 33 — 5.1; 5.1.1; 5.1.2; 5.1.3; 5.1.4; 5.2; 5.3; 5.3.1; 5.4; 5.5; 6.1; 6.1.1; 6.1.2; 6.1.3; 6.1.4; 6.2; 6.3; 6.4; 7.1; 7.2; 7.3; 7.4; 7.4.1; 7.5; 7.6; 7.7; 8.1; 8.2; 8.2.1; 8.2.2; 8.3; 8.4; 8.4.1 - Broadly observed: 2 — 6.1.5; 7.4.2 - Partly observed: (none listed) - Non-observed: (none listed) - Not applicable: 1 — 7.3.1 ### Recommended action plan (summary of key recommendations) - From paragraph 18: - Consider releasing the text of the President’s speeches to the public. - Make public existing MoUs with other national agencies. - Make consultation procedures between domestic agencies public to assure the public of mechanisms to deal with cross-cutting regulatory issues. - From paragraph 19 (specific recommendations): - (6.1.1) Publish the internal procedures currently under development in the BOE and on the website (compatible with confidentiality considerations and the need to preserve the effectiveness of CNMV), after they have been formally approved. - (6.1.3) Provide timely interpretation of CNMV rules whenever requested. - (6.3) Disclose to the public the text of CNMV speeches before the Parliamentary Committee on Economics, Trade, and Finance, e.g., through the website. - (7.6) Promote more information disclosure by the FGI on the investor protection scheme, including its operating procedures, financing, and performance. - (8.2.1) Include the notes to the financial statements in the published annual report. - Table 6 highlights two actions: - (6.1.5) Make public the existing MoUs with the other national regulators. - (7.4.2) There should be a presumption in favor of releasing the text of senior officials’ statements to the public; speeches before parliament should be posted on the website. ### Authorities’ response to the assessment - Broad agreement with the assessment; measures already adopted: - (6.1.3) Documents providing interpretation of CNMV rules have been posted on the website (Criterios en el Ambito de la Autorización y Registro de los Fondos de Inversión and Criterios sobre la Aplicación de la Nueva Normativa de Mercados Primarios). - (6.3) A new section of CNMV’s website (comunicaciones) is being set up which will contain, among other things, the speeches and statements of CNMV’s senior officials. - (7.6) The already availabile information about FGI’s the investor protection scheme (investor corner section of CNMV’s website) will be widened. - Consideration underway: - Options to publish the text of existing MOUs with other national authorities (6.1.5). - Options to publish CNMV’s internal procedures (6.1.1). - Options to publish the notes to the financial statements (8.2.1). *Source: _cr06223 - 8.1 Officials of financial agencies should be available to appear before a designated public* ### 5.2 The relationship between financial agencies should be publicly disclosed. ### 5.2 The relationship between financial agencies should be publicly disclosed. ### Description and legal framework - The relationship between the Funds and the BE is regulated and publicly disclosed in RD 2606/1996. - As described in 5.1.4, four members of the Management Committee represent the BE, the BE Deputy Governor being the chairman of each Fund. - The Funds are accountable to the BE and may under exceptional circumstances draw on funds from the BE. - Art. 2 specifies the modalities of information exchange: “The Management Committees shall demand from the Bank of Spain as much information they need regarding their member institutions for the performance of their functions. In particular, they shall be informed by the Bank of Spain regarding those institutions in economic difficulties that may require action on the part of their respective Fund.” - Article 10.1 states: “exceptionally, when according to the information supplied by the Bank of Spain, the situation of a credit institution is such that it may be foreseen that the Fund shall be obliged to make a payment (...), the Fund shall be able to carry out preventive measures and restructuring of the institution concerned with a view to improving its viability and enabling it to overcome its crisis, within the framework of an action plan proposed by the institution and approved by the Bank of Spain.” - Relevant legislation is posted on the website. ### Assessment - Assessment: Observed. ### Related transparency arrangements (selected findings across sections 5–8) - 5.3 The oversight of payment systems is the responsibility of the Bank of Spain. - Assessment: Not applicable. - 6.1 The conduct of policies by the Funds, including actions to be taken in the event of bank problems, are defined in RD 2606/1996 and made public. - Assessment: Observed. - 6.1.4 Fee structure for Funds (RD 2606/1996 Art. 3): - “annual contributions by member institutions of the Funds shall be 2 per 1,000 of the deposits held as at the end of the financial year for which the guarantee is given. To this end, the basis for the calculation will be integrated with the deposits covered by the system in accordance with the definition in Article 4.1, plus 5 per 100 of the quoted value of the stock covered by the system, as defined in Article 4.2, on the last day of trading of the year in the relevant secondary market. When the assets of a Fund reach a sufficient amount for it to be able to fulfill its functions, the Minister of Economy, upon proposal of the Bank of Spain, may agree to a decrease in the contributions mentioned in point 1 of this article. In any case, such contributions shall be suspended when the assets not committed to any of the operations proper to the purposes of the Fund are equal to or greater than 1 per cent on the base of calculation of contributions foreseen at the precedent section 1, this fact being communicated by the Management Committee in the form determined by it.” - Assessment: Observed. - 6.1.5 Information sharing and consultation: - RD 2606/1996 Art.2: “the Management Committees shall demand from the Bank of Spain as much information as needed regarding their member institutions for the performance of their functions. In particular, they shall be informed by the Bank of Spain regarding those institutions in economic difficulties that may require action on the part of their respective Fund.” - The Funds are members of the European Forum of Deposit Insurers (EFDI). - Assessment: Observed. - 6.2 Changes in financial policies: laws and regulations are subject to public consultation and are published in the BOE. - Assessment: Observed. - 6.3 Annual reports: Annual reports are issued for each Fund and for the Management Company and are available on the website at no cost. - Assessment: Observed. - 7.2 Aggregate data disclosure: - The FGD discloses aggregate data on financial operations (collected contributions, other funding, investments, pay-offs). - The BE publishes aggregate data on the banking sector. - Assessment: Observed. - 7.3 Annual audited financial statements: - According to RD 2606/1996 Art.2.4, the Funds must provide annual accounts to their members and the BE. - Annually, the financial statements, audited by independent auditors and approved by the Management Committee, are made public and posted on the website. Complementary information on signed contracts is remitted annually to the National Audit Office (Tribunal de Cuentas). - Assessment: Observed. - 7.3.1 Emergency financial support: - Emergency financial support information is publicly disclosed through a statement and on the website; such support needs prior authorization by the BE through an action plan as prescribed in RD 2606/1996. - Assessment: Observed. - 7.4 Public information services: - The FDG website contains general information, legislation, legal advice, press statements regarding activities in problem institutions, and the annual reports; website available in English and Spanish; office responds via e-mail, fax, or telephone. - Assessment: Observed. - 7.4.2 Senior officials’ public communications: - Senior officials have authority to explain policies, objectives, and performance, but in practice have not made public statements beyond the website; public statements about interventions are made by the BE and the problem institution. - Assessment: Partly observed. - Comment: “A more proactive approach to informing the public and a formal policy on public communications by senior FGD officials and on the release of the texts of public statements would be desirable.” - 8.1 Appearance before designated public authority: - FGD officials are not explicitly required to appear before designated authorities; BE is required by law to appear before parliament and relies on FGD information when relevant. - Assessment: Partly observed. - Comment: “A stated policy and/or track record regarding the appearance of FGD officials before a designated public authority, presumably parliament or a parliamentary commission, is needed for an ‘observed’ rating.” - 8.2 Audited financial statements and disclosure: - Financial statements are audited by independent external auditors; information on accounting policies and any qualification to the statements are publicly disclosed; complementary information remitted to the National Audit Office. - Assessment: Observed. - 8.2.2 Internal governance and internal audit: - Management Committees manage the Funds; the Management Company manages Funds’ capital and is governed by Law 12/1991 and performance contracts. - Given the reduced size of administrative units (15 employees in total), the Funds do not have internal audit. The Management Company has a Controlling Council with three members representing each type of bank covered by the Funds with internal control functions. - Internal governance procedures exist (e.g., “Norms on Organization and functions of the Management Company”, “Rules on the Functions of the Controlling Council”) and are disclosed on the website and in the annual report, but internal governance procedures governing decisions and accountability are not made public. - Assessment: Partly observed. - Comment: “The FDG should publish information on its internal governance procedures in order to obtain an observed rating.” ### Policy implications and recommendations (drawn from assessments and comments) - Maintain and continue to publish RD 2606/1996 provisions and related legislation on the website to preserve observed status of relationship disclosure. - Publish explicit internal governance procedures governing decisions and accountability to move from “Partly observed” to “Observed” for internal governance transparency. - Adopt a formal policy and a more proactive approach for public communications by senior FGD officials and a presumption in favor of releasing texts of public statements. - Establish a stated policy and track record regarding the appearance of FGD officials before a designated public authority (e.g., parliament or parliamentary commission), particularly for cases involving bank interventions or disagreements with the BE. - Continue annual publication of audited financial statements and detailed notes; ensure complementary information flow to oversight bodies (National Audit Office) is maintained. *Source: _cr06223 - 5.2 The relationship between financial agencies should be publicly disclosed.* ### 8.4 Standards for the conduct of personal financial affairs of officials and staff of financial ### 8.4 Standards for the conduct of personal financial affairs of officials and staff of financial ### Standards for conduct and conflict-of-interest rules - RD 2606/1994 Art. 2.7 states that “the members of the Management Committee shall keep secret all information they may obtain as a result of their participation in the activities of the Fund, and they may not make use of such information for purposes other than those relating to the exercise of their office on the Committee.” - Article 2.1 includes rules to avoid conflicts of interest and specifies that “in the case of bank representatives, they must also be replaced upon request of the Committee chairman whenever the Committee has to deal with matters directly relating to an institution or group of institutions said representative is associated with as manager, executive, contractual employee or otherwise, or any other relationship that may affect the objectivity of his decisions (...).” - This legislation is posted on the website. - Assessment: Broadly observed. - Comment: “Information on the standards of conduct of personal financial affairs should be publicly disclosed by other means, in addition to legislation, for an observed rating. This is especially important considering that the Management Committees includes four representatives from market institutions that can be affected by problems in a financial entity.” ### Legal protections for officials and staff in conduct of official duties (8.4.1) - Description: “There is no legal protection for officials and staff of the Funds and Management Company in the conduct of their official duties.” - Assessment: Not applicable. - Comments: (none provided in source) ### Summary of observance (Table 8 highlights) - Practices Grouped by Assessment Grade - Observed: 22 — 5.1; 5.1.1; 5.1.2; 5.1.3; 5.1.4; 5.2; 6.1; 6.1.1; 6.1.4; 6.1.5; 6.2; 6.3; 7.2; 7.3; 7.3.1; 7.4; 7.4.1; 7.5; 7.6; 8.2; 8.2.1; 8.3 - Broadly observed: 1 — 8.4 - Partly observed: 3 — 7.4.2; 8.1; 8.2.2 - Not applicable: 10 — 5.3; 5.3.1; 5.4; 5.5; 6.1.2; 6.1.3; 6.4; 7.1; 7.7; 8.4.1 ### Recommended Action Plan (selected actions relevant to 8.4) - Overall observation: “The FGDs already adhere to almost all of the practices of the Transparency Code. To further refine transparency, the Deposit Insurance Funds may consider the following:” - Relevant recommended actions (text preserved): - “Developing a more proactive approach to informing the public. This includes a formal policy on public communications by senior FGD officials and on the release of the texts of public statements. Accountability would also be improved with a stated policy regarding the appearance of FGD officials before a designated public authority (e.g., parliament or a parliamentary committee). Such an arrangement would be especially relevant in case of bank restructuring actions by the FGD or differences of opinion on the subject between the FGD and the BE.” - “Disseminating information (other than legislation) on internal governance procedures and standards of conduct of personal financial affairs. This is especially important considering that the Management Committees includes four representatives from institutions that can be affected by and have conflicts of interest in relation to problems in a financial entity.” - Table 9 (selected entries related to 8.4): - Reference Practice: 8.4 Standards for the conduct of personal financial affairs of officials and staff of financial agencies and rules to prevent exploitation of conflicts of interest, including any general fiduciary obligation, should be publicly disclosed. - Recommended Action: “Information (other than legislation) on standards of conduct of personal financial affairs should be disclosed to the general public. This is especially important considering that the Management Committees includes private sector representatives that may be affected by and have conflicts of interest in relation to problems in a financial entity.” ### Authorities’ response (relevant points) - General position: “The authorities are in broad agreement with the assessment but note that with reference to principle 7.4.2, they do not see a need to be more proactive in providing public information on deposit insurance because by law, the banks are obliged to do so. They point out that the cost of providing additional information to the public would be high in relation to its benefits. The authorities agree that in general, a well designed information program can enhance public confidence in credit institutions, but note that in the case of Spain, public confidence is already high and the launch of an information program on deposit insurance could have the opposite effect, that is, weaken confidence.” - On accountability (principle 8.1): “Since the President of the FGD Management Company is the BE Deputy Governor, the BE has sufficient information about the funds that can be used as needed during appearances before parliament. The authorities consider the possibility of differences in opinion between the FGD and the BE on bank restructuring issues to be theoretical, as four of the eight members of the Management Committee are BE representatives, and the President, who is the BE Deputy Governor, has a deciding vote.” - On public disclosure of internal control regulations (8.2.2): “The authorities are of the view that the composition of the governing bodies of both the funds and the Management Company ensure the transparency of, and control over, their actions.” *Source: _cr06223 - 8.4 Standards for the conduct of personal financial affairs of officials and staff of financial* ### 2. Elected Council members may not be involved in professional activities linked to credit ### _cr06223 - 2. Elected Council members may not be involved in professional activities linked to credit ### Eligibility, conflicts of interest, and related rules - Elected Council members may not be involved in professional activities linked to credit institutions of any type, to securities markets or to private financial institutions during their terms in office. - Serving on the Bank Council is compatible with teaching and research activities. - These aspects are also elaborated in the RIBE. - There are no special rules for the Director General of Banking Supervision. However, Art. 6 (secrecy) and art 26.2 (other professional activities) apply also to all General Directors (LABE Art. 30). - All the mentioned legislation and RIBE have been made public in the BOE and are available on the BE website. - Assessment: Observed. ### Disclosure of relationships among financial agencies (scope and practice) - LABE Art. 7.8: “the Bank may establish relationships with other central banks, with financial supervisory authorities and financial institutions in other countries, and with international monetary and financial organizations. It may also establish relationships with public financial institutions and regional financial supervisory authorities.” - LABE Art. 1.3: “the Bank is an integral part of the European System of Central Banks (“ESCB”) and shall be subject to the provisions of the Treaty of the European Community (“Treaty”) and to the Statutes of the ESCB. In the exercise of the functions arising from its status as an integral part of the ESCB, the Bank shall follow the guidelines and instructions emanating from the European Central Bank (“ECB”) under the terms of the aforementioned provisions.” - The Bank of Spain has full responsibility for national payment system oversight (LABE). - Since December 2004, Spain has two payment systems: the SLBE (operated by the BE) and the SNCE (low-value payments). - Iberclear (register and clearing/settlement for stock exchange trades) is supervised by the CNMV (LMV). - Supervisory powers over national payment systems are disclosed on BE’s website; supervisory powers over Iberclear are disclosed in CNMV Annual Report on Activities and on Iberclear’s website. - D.A. 2 of the Financial Law (Law 44/2002) recognizes possibility to sign national agreements between supervisors and points to an obligation of cooperation between the BE, the CNMV, and the ME to harmonize supervision practices and criteria and to exchange relevant information. - Cross-membership: BE deputy governor is an advisor in CNMV council; Director General of Treasury and Financial Policy and CNMV vice president are members of BE governing council. - BE has signed agreements with the CNMV (June 9, 2004) and the DGS (March 12, 2004). New agreements are made public in the Management Report of BE’s Annual Report. - New EU-relevant legislation is published in the Official Journal (OJ); national legislation in the BOE. Legislation is also available on the ECB and BE websites. - Assessment: Observed. ### Payment systems oversight disclosure and materials - BE posted on its website/Payment systems a formal declaration: El Banco de España y la Vigilancia de los Sistemas de Pago. This is written in a non-technical manner and accompanied by a statement to the press. - The declaration is included in the BE’s 2005 Financial Stability Review. - BE issued an institutional pamphlet The Bank of Spain and the Payment Systems, distributed at national and international events; text was posted on the website prior to the declaration. - The payment systems section of the BE website links to the ECB declaration Role of the Eurosystem in the Field of Payment Systems Oversight. - Assessment: Observed. ### Public disclosure of policy principles and risk management for payment systems - General policy principles related to payment systems are described in legislation (ESCB Statute and LABE) and made public through press and websites. - Eurosystem communicates payment system standards and principles to the public, including the CPSS Core Principles for Systemically Important Payment Systems (adopted in 2001). - Documents linked from BE payment systems section: Oversight Criteria for Low-value Payment Systems in Euro; Report on Electronic Money; Report on the objectives of electronic money systems security. - BE usually publishes in Spanish ECB press releases accompanying new documents. - Information on risk management policies of SLBE and SNCE is described on the website/Payment systems/SLBE and /SNCE. - BE reports each year on its payments systems activities in the management report section of the Annual Report. - Assessment: Observed. ### Oversight relationships with self-regulatory organizations (SESP and SNCE) - Since 2004, SNCE is operated by Sociedad Española de Sistemas de Pago S.A. (SESP), a self-regulatory organization owned by the banking system. - Chapter II of the Law on Payment and Securities Settlement Systems (Law 41/1999 as modified by Law 2/2004) regulates the nature, functions, juridical regime, and oversight regime of the SESP. - Article 17.3 defines the BE as the corresponding supervisor of the SESP. - BE has the power to approve the by-laws and general regulations affecting SNCE; the law requires publication of regulations in the BOE. - Assessment: Observed. - Comment: Before reforms of 2004, BE had oversight responsibilities over SPI under earlier Law 41/1994. ### Open process for formulating and reporting financial policies (transparency, consultations, reporting) - BE policy: to be as open and transparent as possible about its payment system oversight work. LABE Art. 16 specifies actions to be taken by the BE. - LABE Arts. 7 and 16 and ESCB Statutes Arts. 3 and 22 explain regulatory framework; operating procedures covered in LABE; law available on the BE website. - BE posted formal declaration El Banco de España y la Vigilancia de los Sistemas de Pago; included in the 2005 Financial Stability Review. - As part of the Eurosystem, BE applies and communicates rules and procedures for payment system oversight via BE and ECB publications and websites (examples: The Role of the Eurosystem in Payment System Oversight; Oversight Criteria for Low-value Payment Systems in Euro). - BE Circular 4/2004 regulates information provided to the supervisor and models of financial statements; adapted Spanish accounting regime to IFRS standards. The regulation is made public by the BE in its publications and on the website. - Assessment: Not applicable (financial reporting by institutions is made to the DGS, not the DGO within the BE). - Regulations for operation of organized financial markets are publicly disclosed by the CNMV. - Assessment: Not applicable (BE does not issue these regulations in its payment system oversight role). - BE does not charge fees to financial institutions in its payment systems oversight role. - Assessment: Not applicable. - Formal procedures for information sharing and consultation: - BE’s role in the Eurosystem provides framework for information sharing and consultations among BE, ECB, and national central banks. - BE signed a EU protocol in 2001 on cooperation among agencies responsible for payment system oversight and banking supervision. - In 2003, BE signed a memorandum establishing high level principles for cooperation in crisis management among national central banks and bank supervisors of the European Union. - Signing of both memoranda communicated via ECB press releases on ECB and BE websites. - BE signed agreements with CNMV (June 9, 2004) and DGSFP (March 12, 2004); made public in Management Report of BE Annual Report. - Assessment: Broadly observed. - Comment: To be rated Observed, the content of the MoUs should be made public, not only the year they were signed. - Significant changes in financial policies: - BE applies Eurosystem rules and communicates changes via BE and ECB publications, press releases, and website; ECB press conferences follow monthly meetings. - Nationally, BE announces/significant changes via Annual Report, website, notas informativas, monthly publications, press releases; major changes published in BOE the day following such decisions. - BE maintains a Q&A system on the website. - Payment system decisions are discussed with affected financial entities in a high level payment systems group chaired by a BE representative. - Assessment: Observed. - Periodic public reports on policy objectives: - BE has issued reports sporadically (example: The Bank of Spain and Payment Systems Oversight). - Management Report section of BE’s Annual Report describes operation of payment systems but not oversight activities. - Assessment: Partly observed. - Comment: Periodic reports on how objectives are being pursued are required for an observed rating; payment system oversight activities should be mentioned in the BE’s Management Report. - Public consultations for substantive technical changes: - Legal framework requires public debate and consultations with affected sectors; relevant legislation posted on BE website. - Articles 3.2 of LABE and 8.5 of RIBE: “in the case of Circulars, the affected parties should receive a hearing”; Art. 24 of the Law on Government (Law 50/1997) expects public consultations in the elaboration of regulations such as BE Circulars. - BE maintains ESCB consultations section on website; consultations usually provide not less than three months for written comments; comments received are made public at end of consultation period. - Examples of public consultations in 2002: Oversight Criteria for Low-value Payment Systems in Euro; The Objectives of Electronic Money Systems Security. - BE maintains continuous contact with financial sector; high level payment systems group (about 20 member banks and three associations) chaired by BE Director General meets regularly twice a year for about three years. - Assessment: Observed. ### Public availability of sectoral developments and aggregate data - BE Annual Report describes major developments in the financial sector, Spanish economy, and international economy. Since 2003 it includes a Management Report. - The 2003 Management Report includes a section on payments systems operations and a short description of principal developments in the payment system during the year. - Occasional BE publications on payment systems: The Bank of Spain and Payment System Oversight; Financial Stability Review articles including “The Payment Systems Contribution to Financial Stability: The Spanish Case” (No. 5, 2003) and “Evolution of Credit Cards as a Payment Instrument in Spain (1996-2003)” (No. 5, 2005). - Annual Report and Financial Stability Review (in Spanish only) available at no cost on the BE website. - Payment system section of website posts statistical and other information on operations of systems under oversight. - Assessment: Partly observed. - Comment: The payments systems section in the Management Report should be developed further; a planned yearly report on payment systems would achieve an observed rating. - Public reporting of aggregate data: - Aggregate data related to payment system operations are reported publicly on a timely and regular basis. - Information presented in tables and graphs; available in payment system section under Blue Book Statistics, SLBE and SNCE. - Reports contain yearly and monthly data and are updated every month, usually within a month after the end of the reporting period. - Assessment: Observed. *Source: _cr06223 - 2. Elected Council members may not be involved in professional activities linked to credit* ### 7.3 Where applicable, financial agencies should publicly disclose their balance sheets on a ### _cr06223 - 7.3 Where applicable, financial agencies should publicly disclose their balance sheets on a ### 7.3 Disclosure of balance sheets and aggregate market transactions - Description - BCE/2002/10 on the legal regime of accounting and elaboration of financial reports in the ESCB is the basis for BE as well as for the other national central banks. It includes fundamental accounting principles, defines assets and liabilities, rules for the composition of the balance sheet, and valuation criteria. - The economic regime of the BE is established in Art. 4 of LABE, including procedures for elaboration, approval, and publicity of the balance sheet and annual accounts: - “The government, upon proposal by the Economy and Finance Minister, shall have the authority to approve the annual balance sheet and accounts of the Bank, which will be sent to Parliament for informational purposes. Without prejudice to the terms of Article 27 of the Statutes of the ESCB, the Bank shall be subject to external auditing by the National Audit Tribunal, under the terms of Organic Law 2/1982, of May 12, on the National Audit Tribunal. The report accompanying the annual balance sheet and accounts shall give further detail on different operations or items on the balance sheet, according to their characteristics. In particular, the Bank's contributions to the Deposit Guarantee Funds shall be detailed, as will any loans or other operations transacted for the benefit of any other institution or person not on an arm's-length basis, or which in any other way involve loss of profit or losses for the Bank. In such cases the amount of such loss of profit or losses shall be specified.” - Articles 7 and 29 of RIBE further regulate the accounting system and the establishment and publicity of the annual accounts and balance sheet of the BE. - Art. 29: annual accounts developed by the Associate Directorate-General for Internal Affairs; audited by internal and independent external auditors; published in the BOE and, in summary format, in the BE Statistical Bulletin. Art. 33: sent to the National Audit Office within two months of government approval. - Assessment - Not applicable. - Comments - The DGO is part of the organizational structure of the BE and its funding and expenditures are determined as part of BE’s budget. ### 7.3.1 Aggregate disclosure of emergency financial support - Description - Consistent with confidentiality and privacy of information on individual firms, aggregate information on emergency financial support by financial agencies should be publicly disclosed through an appropriate statement when such disclosure will not be disruptive to financial stability. - Assessment - Not applicable. - Comments - This is not a responsibility of the Payment System Department. ### 7.4 Public information services and communications - Description (Communications Department functions) - The Communications Department disseminates policy decisions and policy announcements, provides information on the operating framework and objectives, publishes texts of major speeches by senior officials, data, and research reports, arranges seminars, and maintains contact with the media. - BE communication instruments grouped into two categories: addressing the media and addressing the general public. - For the media: - Information notes transmitted to more than a hundred recipients by electronic mail and simultaneously posted on the BE website. - Periodic notes: monthly (balance sheets, mortgage market), quarterly (international investments), half-yearly (Financial Stability Report). - In 2004, the BE issued 49 information notes. - About a dozen press events organized in 2004 linked to publications, conferences, economic awards. - Regular off-the-record meetings between high ranking BE officials and the specialized press; technical seminars (most recent on Basel II and new international accounting rules). - Speeches: - Governor: 22 in 2004. - Deputy governor: 2 in 2004. - Directors general: Supervision 1, Regulation 10, Studies 5 (respectively in 2004). - Governor’s speeches are available on the English website; other speeches may be available in English only on the Spanish website. - Publications and public materials: - BE publishes books and pamphlets (recently: Monetary Policy Glossary) and is developing a Welcome Manual to the BE. - Website: special section under development for bank clients; includes email address, telephone, and fax to receive public questions; wide range of information. - Banking supervision and financial markets publications in Spanish in the Banking Supervision section; English language website for banking supervision is not updated and does not include any publications. General information on banking supervision in Spain found in About us/functions/banking supervision, but not in the Banking Supervision section. - Permanent information source: BE Publications Service. - Assessment - Observed. - Comments - The English- and Spanish-language websites should be better coordinated, e.g., with respect to published speeches. - The payment systems section should be updated to reflect the fact that the SPI no longer exists. ### 7.4.1 Publications program and periodic public report - Description - Publications program established in the Resolution March 28, 2000 of the BE governing board. - Periodic reports include: - Boletín Económico (monthly evaluation of general economic situation) - Estabilidad Financiera (evaluation of national financial stability) - Official statistics: Boletín Estadístico, Cuentas Financieras de la Economía Española, Balanza de Pagos, Central de Balances, Indicadores Económicos - Memoria de la Supervisión Bancaria (bank supervision activities) - Informe Anual del Mercado de Deuda, boletines diarios del mercado de deuda pública (public debt management operations) - Memoria del Servicio de Reclamaciones (complaints) - BE Annual Report, published in June, includes a Management Report explaining main activities; accompanied by the Speech of the Governor. - Distribution and reach: - All publications distributed to the press and to more than 3,200 subscribers, and posted on the website. - Limitation: - The Management Report section of the BE’s Annual Report only covers the operation of payment systems, not the oversight activities. - Assessment - Partly observed. - Comments - A periodic public report on payment system oversight is needed for an observed rating. - The planned yearly report on payment systems including oversight activities would achieve this objective. - Payment system oversight activities should be mentioned in the Management Report. ### 7.4.2 Senior officials and public statements - Description - Article 10 of LABE: the Bank shall regularly inform Parliament and the government of the objectives and the implementation of monetary policy; the Governor may be asked to appear before Congress or Senate committees or at cabinet/commission meetings. Governor may attend Consejo de Política Fiscal y Financiera de las Comunidades Autónomas meetings to report on issues within the Bank's authority. - In practice, the Governor appears regularly before parliament, usually three times a year. It is common for Governor, Deputy Governor or Directors General to make public speeches. - Assessment - Observed. - Comments - The English- and Spanish-language websites should be better coordinated, e.g., with respect to published speeches. ### 7.5 Availability of texts of regulations, directives and guidelines - Description - Relevant rules and regulations are contained in a number of Circulars issued and modified by the BE (Arts. 3.1. and 16 of LABE, Art. 7 of RIBE). New Circulars are published in the BOE (Arts. 3 of LABE and 8.9 of RIBE). - The system of Circulars is hard to follow due to modifications. - Legislation affecting the BE is regularly updated on the BE website under “Legislation,” e.g., the Circulars. - Payment System section of the website contains a Legislation section with links to key national and European laws and regulations on consumer protection. - Assessment - Observed. - Comments - Due to many modifications of BE circulars it is recommended that the overall organization of BE circulars be updated to improve transparency. ### 7.6 Deposit insurance and investor protection disclosure - Description - Legal regime for deposit insurance: RDL 4/1980, RDL 18/1982, and RD 2606/1996; RD 948/2001 for investor protection. - Deposit Guarantee Fund website (www.fgd.es) contains detailed information on the deposit guarantee. The BE also has a website section dedicated to deposit insurance. - Assessment - Not applicable. - Comments - This is not a responsibility of the Payment Systems Oversight. ### 7.7 Disclosure of consumer protection arrangements overseen by financial agencies - Description - Article 31 Law 44/2002 and Art. 8.4 Order ECO/734/2004 gather BE faculties to verify regulations for departments and services to attend clients. - Chapter II of BE Circular 8/1990 defines organization and functions of the BE Complaints Service. - Art. 5 e) and 48.2 LDI state sanction for lack of transparency regarding operations of credit entities. Credit entities should have organs for client conflict resolution and provide information in their annual reports. - Assessment - Not applicable. - Comments - This is not the responsibility of the Payment Systems Department. --- ### VIII. Accountability and assurances of integrity by financial agencies ### 8.1 Appearances before public authorities and reporting - Description - Article 10 of LABE (see 7.4.2) requires regular information to Parliament and government and allows the Governor to be asked to appear before committees or councils. - In practice, Governor appears regularly before parliament, usually three times a year. - In 2004 the governor appeared before the Budget Commissions of Congress (Deputies, October 13 and Senate, November 24), as well as before the Economy and Finance Commission (Deputies, June 30) to discuss economic conditions and policy. Appearances are made public in the Diario de Sesiones del Congreso. - The BE, usually through the Governor or a Director General, informs on objectives and performance of its functions. Public speeches by the Governor, Deputy Governor, and Directors General are posted on the website and in some cases included in other BE publications. - Assessment - Observed. ### 8.2 Public disclosure of audited financial statements - Description - Articles 4.2 of LABE and 29 and 32 of RIBE establish the obligation to submit BE accounts, already audited by the Internal Audit Department, to the Audit Committee, external auditors, and the National Audit Office. - The Governing Council submits the annual accounts for government approval, upon proposal by the Minister of the Economy. - The annual accounts of the BE, including notes to the accounts and the audit report, are included in the Annual Report of the BE, issued in June. - Assessment - Not applicable. - Comments - The DGO is part of the organizational structure of the BE; its funding and expenditures are determined as part of the BE’s budget. ### 8.2.1 Independent audit and disclosure of accounting policies - Description - Article 29 and following of RIBE and 4.2 of LABE state that the BE is subject to independent external auditing pursuant to Art. 27 of the Statutes of the ESCB. - The external auditors report (see, for instance, the 2003 Annual Report of the BE, page 226) contains information on accounting policies and qualifications to the statements. - The annual accounts include balance sheet, income statement, notes to the accounts, and the statement of the independent auditor. Contributions to the Deposit insurance fund and all operations not at market value are detailed separately in the report (see 7.3.1). - Assessment - Not applicable. - Comments - The DGO is part of the organizational structure of the BE; its funding and expenditures are determined as part of the BE’s budget. ### 8.2.2 Internal governance procedures and internal audit disclosure - Description - DA 2ª of the Financial Law established measures to improve efficiency and quality of supervision, including issuance of an Annual Report on Supervision that should contain an internal audit of the functioning of BE’s governing bodies, focusing on decisions and suitability of normative procedures applied. - Articles 29 and 32 of RIBE regulate the Internal Audit Department, and Arts. 79–88 its internal control functions. - By-laws of the Internal Audit Department, approved by BE’s Executive Commission on 28 November 2001, are made public on the website/About us/Functional Structure/Internal Audit Department. - Internal audit activities are disclosed in the Management Report Section of the Annual Report, under “Internal Organization and Administration.” - Assessment - Observed. ### 8.3 Operating expenses and revenues disclosure - Description - Articles 4 of LABE and 28 of RIBE specify that the budget, once approved by the Governing Council, shall be forwarded to the government, which will submit it to Parliament for approval. - “The budget shall be prospective in nature, and shall not be consolidated with other State public sector budgets. The government, upon proposal by the Economy and Finance Minister, shall have the authority to approve the annual balance sheet and accounts of the Bank, which will be sent to Parliament for informational purposes (...). The report accompanying the annual balance sheet and accounts shall give further detail on different operations or items on the balance sheet, according to their characteristics (...) or which in any other way involve loss of profit or losses for the Bank. In such cases the amount of such loss of profit or losses shall be specified.” See notes of the loss and profit account on page 118 of the Annual Report 2003. - Assessment - Not applicable. - Comments - The DGO is part of the organizational structure of the BE; its funding and expenditures are determined as part of the BE’s budget. ### 8.4 Standards for personal financial conduct, conflicts of interest, and confidentiality - Description (limitations, disclosures, secrecy, and code of conduct) - Article 28 of LABE. Limitations applicable to members of the Governing Council: 1. Members shall refrain from acquiring or owning goods or rights and from engaging in activities that might compromise independence and impartiality, cause conflicts of interest, or permit use of privileged information. They must contractually entrust to a financial institution registered with the National Securities Market Commission the administration of any tradable securities or financial assets of which they, their non-separated spouses, or dependent children are owners. The institution shall administer assets subject only to general indications of profitability and risk; may not request nor receive investment instructions; may not inform parties of the composition of their investments except in specified cases. Failure of the institution to comply is a very serious offence under its sanction system. 2. In the three months following taking office and the end of their terms, and on an annual basis, members must file a statement on their activities and net worth and those of their non-separated spouses and dependent children. The statement submitted to the Ministry of Public Administration may be verified and inscribed in the Registro de Intereses de Altos Cargos. - Article 6 bis of LABE: BE staff with access to confidential information must report securities market operations they carry out; internal rule determines restrictions on purchase, sale or availability of these securities and reporting obligations for operations with entities subject to BE supervision. - Article 6 of LABE, Art. 6 of RDL 1298/1986, and Art. 17 of RIBE: governing bodies and personnel shall keep secret, even after duties cease, any confidential information received. Breaches are sanctioned per internal rules or Art. 29 of LABE. - BE Code of Conduct (internal circular BE 10/2002) establishes duty to annually register financial activities of all staff and their families. The Code of Conduct is not publicly available, but is posted on the internal website. - Assessment - Broadly observed. - Comments - Public disclosure of the Code of Conduct would be desirable. ### 8.4.1 Legal protections for officials and staff - Description - RIBE: Art. 25 (Protection for BE staff in the conduct of their official duties) and Art. 26 (Legal defense). - Support in Title X of Law 30/1992 (Régimen Jurídico de las Administraciones Públicas y del Procedimiento Administrativo Común) and Royal Decree 429/1993. - Legislation and RIBE are posted on the website. - Assessment - Observed. ### Table 11 — Summary: Observance of IMF’s MFP Transparency Code — Payment System Oversight - Practices Grouped by Assessment Grade - Observed: 21 — 5.1; 5.1.1; 5.1.2; 5.1.3; 5.1.4; 5.2; 5.3; 5.3.1; 5.4; 5.5; 6.1; 6.1.1; 6.2; 6.4; 7.2; 7.4; 7.4.2; 7.5; 8.1; 8.2.2; 8.4.1 - Broadly observed: 2 — 6.1.5; 8.4 - Partly observed: 3 — 6.3; 7.1; 7.4.1 - Not applicable: 10 — 6.1.2; 6.1.3; 6.1.4; 7.3; 7.3.1; 7.6; 7.7; 8.2; 8.2.1; 8.3 *Source: _cr06223 - 7.3 Where applicable, financial agencies should publicly disclose their balance sheets on a* ### 40. Overall, the DGO already adheres to almost all of the practices of the Transparency ### Overall, the DGO already adheres to almost all of the practices of the Transparency Code ### Summary findings - Paragraph 40: "Overall, the DGO already adheres to almost all of the practices of the Transparency Code." - Paragraph 40: IMF mission welcomes BE plans to gather high quality occasional publications and articles in a periodic separate report on payment systems. - Paragraph 40: "Payment system oversight activities (in addition to payment system operations) should also be mentioned in the Management Report section of BE’s Annual Report." - Paragraph 41: "The Bank of Spain may want to consider making public the content of MoUs with other national agencies, in addition to their existence (the year they were signed)." - Paragraph 41: "Knowledge of consultation procedures between domestic agencies provides the public with assurances that financial agencies have established mechanisms to deal with issues that cut across their mandates." - Paragraph 42: To further enhance transparency, the payment systems section of BE’s website should be updated with regard to the SPI. - Paragraph 42: "Due to the many modifications of BE circulars it would also be desirable that the organization of BE circulars be updated so as to improve transparency of the regulation in force." - Paragraph 43: "The authorities are in broad agreement with the assessment. Appropriate measures are being implemented to tackle the recommended action plan." ### Recommended action plan (Payment Systems Oversight) — key practices and actions - VI. Open Process for Formulating and Reporting of Financial Policies - 6.1.5 Where applicable, formal procedures for information sharing and consultation between financial agencies (including central banks), domestic and international, should be publicly disclosed. - Recommended Action: "Make public the content of the MoUs, not only the year they were signed. Knowledge of consultation procedures between domestic and/or international agencies provides the public with assurances that financial agencies have established mechanisms to deal with issues that cut across their mandates." - 6.3 Financial agencies should issue periodic public reports on how their overall policy objectives are being pursued. - Recommended Action: "Issue a periodic report on payment systems, including how oversight objectives are being pursued." - VII. Public Availability of Information on Financial Policies - 7.1 Financial agencies should issue a periodic public report on the major developments of the sector(s) of the financial system for which they carry designated responsibility. - Recommended Action: "Issue a periodic report on payment systems, including major developments." - 7.4.1 Financial agencies should have a publications program, including a periodic public report on their principal activities issued at least annually. - Recommended Action: "Issue a periodic report on payment systems operations and oversight. Payment system oversight activities should also be mentioned in BE’s Management Report." - VIII. Accountability and Assurance of Integrity by Financial Agencies - 8.4 Standards for the conduct of personal financial affairs of officials and staff of financial agencies and rules to prevent exploitation of conflicts of interest, including any general fiduciary obligation, should be publicly disclosed. - Recommended Action: "Public disclosure of the internal Code of Conduct would strengthen confidence in the care with which the BE performs its multiple functions." ### Implementation status - Paragraph 43: "The authorities are in broad agreement with the assessment. Appropriate measures are being implemented to tackle the recommended action plan." *Source: _cr06223 - 40. Overall, the DGO already adheres to almost all of the practices of the Transparency Code* --- _Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2006/_cr06223.pdf_