Rights and obligations is reflected in the regulation

Where a decision to reject an application for credit is based on the consultation of a relevant
database, the creditor must, immediately and at no cost, inform the consumer of the
results of the consultation and of the details of the database. Database managers must
provide creditors from other Member States with access to their databases for assessing
the creditworthiness of consumers. The conditions for access shall be non-discriminatory
for Spanish creditors.
The increased interest of consumers in knowing their rights and obligations is reflected in
the regulation of the content of credit agreements, which takes into account the specific
features of the various kinds of credit agreement.
In the contract termination phase, the Law regulates the right of the contracting parties to
terminate an open-end credit agreement, the consumer’s right to repay the credit early and
the borrower’s position in the event of assignment of the creditor’s rights under a credit
agreement, which had been established in Law 7/1995 and now has its precedent in the
transposed Directive. It also introduces the consumer’s right of withdrawal from a credit
agreement, the regulation of which follows the criteria governing the exercise of this right
in the distance marketing of financial services.
The mathematical formula for calculating the annual percentage rate is intended to define
clearly and comprehensively the total cost of a credit to the consumer,36 and to ensure that
its definition is comparable in all Member States of the European Union. The formula is set
out in the annexes to the Law, as are the assumptions for its calculation. However, in accordance
with Directive 2008/48/EC the Ministry of Economic Affairs and Finance is empowered
to establish additional assumptions or change existing ones if the assumptions
included in the Law do not suffice to calculate said rate in a uniform manner or are not
adapted any more to the commercial situation at the market.
Certain provisions of Law 7/1995 enhancing protection in the area of consumer credit are
retained although they are not required by Union legislation, such as those relating to binding
offers, the effectiveness of contracts linked to the obtainment of credit, improper
charging and penalties for non-compliance with formalities and for omission of compulsory
clauses in contracts.
As regards the penalty regime, non-compliance by credit institutions with the requirements
of this Law are penalised under the law on discipline and supervisory intervention of credit
institutions.37 Non-compliance by other natural and legal persons is an infringement of
consumer and user protection requirements.
The regime governing appeals provides for an out-of-court complaint and redress mechanism
to resolve disputes between consumers and creditors or credit intermediaries, and
incorporates the regulation of injunctions against unlawful conduct.
The Law came into force on 25 September 2011.

New legislation on consumer credit agreements

Law 16/2011 of 24 June 2011 (BOE of 25 June 2011) on credit agreements for consumers
wrote into Spanish law Directive 2008/48/EC of the European Parliament and of the Council
of 23 April 2008 on credit agreements for consumers and repealed Law 7/1995 of 23
March 1995 on consumer credit.
Like the previous law, this Law applies to those contracts whereby a creditor grants or
promises to grant to a consumer credit in the form of a deferred payment, loan, credit line
or other similar financial accommodation. The term “consumer” means a natural person
who is acting for purposes which are outside his trade, business or profession.
The following contracts, inter alia, are excluded from the scope of this Law: a) credit agreements
which are secured by a real estate mortgage; b) credit agreements the purpose of
which is to acquire or retain property rights in land or in an existing or projected building; c)
credit agreements involving a total amount of credit less than €200 (previously €150); d)
hiring or leasing agreements where an obligation to purchase the object of the agreement
is not laid down either by the agreement itself or by any separate agreement; e) credit
agreements in the form of an overdraft facility and where the credit has to be repaid within
one month; f) credit agreements where the credit is granted free of interest and without any
other charges and credit agreements under the terms of which the credit has to be repaid
within three months and only insignificant charges are payable (1% of the total credit
amount); and g) credit agreements where the credit is granted by an employer to his employees
as a secondary activity free of interest or at annual percentage rates of charge
lower than those prevailing on the market.34 However, the partial application of the Law to
credit agreements of total amount exceeding €75,000 (previously €18,030) remains in place.
In order to improve consumer information, the Law addresses what takes place before the
consumer concludes a credit agreement. Specifically, it regulates in detail the basic information
to be included in advertising, in business communications and in the announcements
of offers displayed in commercial premises proposing either a credit or the services
of an intermediary to conclude a credit agreement.
Also set forth is a list of the credit features about which the creditor and, if applicable, the
credit intermediary must inform the consumer before he is bound by any credit agreement
or offer. Such information shall be provided by means of the Standard European Consumer
Credit Information form set out in the annexes to this Law.
Creditors and, if applicable, intermediaries must help the consumer to decide which credit
agreement, within the range of products proposed, is the most appropriate for his needs
and financial situation. This assistance specifically entails an obligation to explain to the
consumer in a personalised manner the characteristics of the products proposed and the
related pre-contractual information and to warn him of the risks attaching to default on
payment and to over-indebtedness. so that he can understand the effects which they may
have on his economic situation.
If the obtainment of credit on the terms and conditions offered is linked by the creditor to
the conclusion of a contract for ancillary services, in particular insurance, the creditor must
inform the consumer of this circumstance and of its cost, and also of the terms and conditions
which would otherwise be applied to the credit agreement should the contract for
ancillary services, in particular insurance, not be concluded.
The creditor must assess the consumer’s creditworthiness prior to the conclusion of the
credit agreement, for which purpose it may use information obtained from its own sources
and that furnished by the consumer, including the consultation of certain databases.35
Although this assessment is compulsory, its scope is left to the discretion of the creditor
depending on the commercial relationship between it and its customer. The assessment
of consumer creditworthiness by credit institutions shall also take account of specific
risk management and internal control rules applicable to them under the related specific
legislation.

Amendment of legal provisions

Categories of collective investment institutions based on investment policy: amendment of legal provisions

CNMV Circular 3/2011 of 9 June 2011 (BOE of 27 June 2011) amended CNMV Circular
1/2009 of 4 February 200933 on CII categories based on investment policy.
The CII types established for the purpose of defining CII categories are changed as regards
listed funds, being reclassified as listed CIIs so as to include the listed index SICAV
(open-end investment company) created by Royal Decree 749/2010 of 7 June 2010
amending the implementing regulations of Law 35/2003 of 4 November 2003 on CIIs approved
by Royal Decree 1309/2005 of 4 November 2005.
The calculation of the investment percentages which define the various investment policies
is changed. Previously the net assets of the CII were taken as the base for the calculation,
whereas now the total exposure of the CII is used.
For this purpose, the total exposure is defined as the sum of the exposure obtained by the
CII through its investments in spot and derivative financial instruments. To calculate the exposure through derivatives, use shall be made of the commitment methodology set out
in CNMV Circular 6/2010 on transactions in derivatives of CIIs. Furthermore, investments
in equity securities issued by non-euro area entities and currency risk shall also be considered
in terms of total exposure.
Lastly, solely for the purpose of determining investment policy, no additional exposure for
the CII is considered to arise if its investments in spot or derivative financial instruments
do not expose it to additional risk, including but not limited to, interest rate risk and credit
risk. Hence they must be in, for example, public debt issued by a State of high credit quality
or repos on these assets, the maturities of which are below three months.
The Circular came into force on 27 August 2011.

APPLICATION OF UNION LEGISLATION

Law 15/2011 of 16 June 2011 (BOE of 17 June 2011) amending certain financial legislation
applies to the Spanish legal system Regulation 1060/2009 of the European Parliament
and of the Council of 16 September 2009 on credit rating agencies.
The main purpose of the Law is to establish the obligation for certain financial institutions29
to use the ratings issued by credit rating agencies. Also, the legislation on credit rating
agencies is adjusted as necessary for the respective national supervisors to cooperate
with the ESMA.
The main amendments made by the Law are as follows:
From the standpoint of solvency, the use by credit institutions or investment firms of
external credit ratings shall require that these have been issued or endorsed by an
ESMA established in the European Union and registered according to Regulation
1060/2009. Ratings of institutions established or financial instruments issued outside
the European Union must have been issued by a credit rating entity established in a
non-Member State that has received an equivalent certification in accordance with
Regulation 1060/2009.
The credit rating agency must have been recognised by the Banco de España or, where
applicable, by the CNMV, in accordance with the criteria established for this purpose and,
in turn, considering the objectivity, independence, transparency and ongoing review of the
methodology applied, as well as the market credibility and acceptance of the credit ratings
issued by that credit rating agency.
The CNMV supervision, inspection and sanctioning regime established in Securities Market
Law 24/1988 of 28 July 1988 shall apply to: 1) the credit rating agencies established in
Spain and registered in accordance with Regulation 1060/2009, persons involved in credit
rating activities, rated entities and related third parties, third parties to whom the credit
rating agencies have outsourced certain functions or activities, and other persons otherwise
related or connected to credit rating agencies or credit rating activities, and 2) the
credit rating agencies registered by a competent authority of the European Union, and the
credit rating agencies registered by a competent authority of a third country that have received
certification based on equivalence under said Regulation, and which in both cases
operate in Spain.
The CNMV shall exercise its authority and apply the infringement and sanctioning regime
pursuant to Law 24/1988 in accordance with European Union legislation on credit
rating agencies. It shall have the necessary supervision and inspection powers to
perform the functions assigned by delegation or under cooperation arrangements with
other competent authorities, in accordance with the provisions of Regulation
1060/2009.
The CNMV shall cooperate with and assist other competent authorities of the European
Union to carry out the functions set out in Regulation 1060/2009. In particular it may request
the cooperation of other competent authorities of the European Union in a supervisory
activity, for an on-the-sport verification or an investigation of, inter alia, matters relating
to credit rating agencies.
Lastly, the CNMV shall maintain, in addition to the official registers set out in Law 24/1988,
which shall be freely available to the public, a register of credit rating agencies established
in Spain.
The Law came into force on 18 June 2011.

AMENDMENT OF UNION LEGISLATION

The main change introduced by the Regulation is that it entrusts to the new European
Securities and Markets Authority (ESMA)27 most of the functions relating to the registration,
deregistration and ongoing supervision of credit rating agencies, jointly with those of
the competent authority of the credit rating agency’s home Member State. Previously
these powers were shared by the Committee of European Securities Regulators and,
where appropriate, the competent authority of that Member State. In general, a noteworthy
change from the previous legislation is the reduction of the time period for the ESMA
to examine the application for registration submitted by a credit rating agency.
The ESMA is empowered to require credit rating agencies, persons involved in credit rating
activities, rated entities and related third parties, third parties to whom the credit rating agencies
have outsourced operational functions or activities and persons otherwise closely and substantially
related or connected to credit rating agencies or credit rating activities to provide
all information that is necessary in order to carry out its duties.
The ESMA may delegate specific supervisory tasks to the competent authority of a Member
State, for instance where a supervisory task requires knowledge and experience with
respect to local conditions, which are more easily available at national level. The kind of
tasks that it has to delegate include the carrying out of specific investigatory tasks and
on-site inspections.
The ESMA may impose fines on credit rating agencies, where it finds that there are serious
indications of the possible existence of facts liable to constitute one or more of the infringements
listed in the Regulation. Fines are imposed according to the level of seriousness
of the infringements. For this purpose, the Regulation establishes coefficients linked
to aggravating and mitigating circumstances in order to give the ESMA the necessary tools
to decide on a fine which is proportionate to the seriousness of an infringement. The ESMA
is empowered to take a range of measures, including, but not limited to, requiring the
credit rating agency to bring the infringement to an end, suspending the use of credit ratings
for regulatory purposes, temporarily prohibiting the credit rating agency from issuing
credit ratings and, as a last resort, withdrawing the registration when the credit rating
agency has seriously or repeatedly infringed the Regulation.
The ESMA, along with the competent authorities and the sectoral competent authorities,
shall cooperate with each other and exchange the information required for the purposes of
carrying out their duties. Also, powers are granted to the ESMA (previously to the competent
authorities of the Member States) to transmit to the national central banks, the European
System of Central Banks and the European Central Bank, in their capacity as monetary
authorities, to the European Systemic Risk Board and, where appropriate, to other
public authorities responsible for overseeing payment and settlement systems, confidential
information intended for the performance of their tasks.
Lastly, exclusive powers are granted to the ESMA (previously to the competent authorities
of the Member States) to conclude cooperation agreements on information exchange with
the supervisory authorities of third countries, provided that the information disclosed is
subject to guarantees of professional secrecy.
The Regulation came into force on 1 June 2011.

Amendment of legislation on the procurement of euro banknotes

Guideline ECB/2011/3 of 18 March 2011 (OJ L of 1 April 2011), amending Guideline
ECB/2004/18 of 16 September 2004,25 on the procurement of euro banknotes was issued
in compliance with the requirement to review Guideline ECB/2004/18 at the beginning of
2008 and every 2 years thereafter.
The ECB Governing Council decided on 10 July 2003 that a single Eurosystem tender
procedure should apply to the procurement of euro banknotes at the latest from 1 January
2012 onwards. Thus national central banks (NCBs) that have an inhouse printing works, or
those using a public printing works may elect not to participate in the single Eurosystem
tender procedure. In such cases, these printing works will remain responsible for the production
of the euro banknotes that have been allocated to their NCBs in accordance with
the capital key but will be excluded from participating in the single Eurosystem tender
procedure.
The expected start date of the procedure described above may be changed by a Governing
Council decision where more than half of the national central banks (NCBs) representing
more than half of the Eurosystem’s total banknote printing requirement choose not to
participate.
Given that this situation has occurred, Guideline ECB/2011/3 changes the start date of the
single Eurosystem tender procedure from 1 January 2012 to 1 January 2014, unless the
Governing Council decides on a different start date.
The Guideline came into force on 20 March 2011.

Mergers of public limited liability companies: Union legislation

Directive 2011/35/EU of the European Parliament and of the Council of 5 April 2011 (OJ L
of 29 April 2011) concerning mergers of public limited liability companies coordinates the
safeguards required in mergers for the protection of the interests of members and others.
The Directive incorporates most of the provisions of Council Directive 2001/23/EC of 12
March 2001 on the approximation of the laws of the Member States relating to the safeguarding
of employees’ rights in the event of transfers of undertakings, businesses or
parts of undertakings or businesses, as well as the provisions on reporting and documentation
set out in Directive 2009/109/EC of the European Parliament and of the Council of
16 September 200922 amending Council Directives 77/91/EEC, 78/855/EEC and 82/891/
EEC, and Directive 2005/56/EC as regards reporting and documentation requirements in
the case of mergers and divisions. It thus regulates these transactions with a view to ensuring
that third parties are sufficiently informed.
The Member States shall, in accordance with this Directive, make provision for rules governing
merger by the acquisition of one or more companies by another company23 and
merger by the formation of a new company.
In the case of merger by acquisition, the administrative or management bodies of the
merging companies shall draw up draft terms of merger in writing, the content of which is
set out in detail in the Directive. Draft terms of merger must be published for each of the
merging companies, at least one month before their approval, or made available on its
website free of charge for the public or via the central electronic platform referred to in
Directive 2009/101/EC.
One or more experts, acting on behalf of each of the merging companies but independent
of them, appointed or approved by a judicial or administrative authority, shall examine the
draft terms of merger and draw up a written report to the shareholders. However, the laws
of a Member State may provide for the appointment of one or more independent experts
for all the merging companies, if such appointment is made by a judicial or administrative
authority at the joint request of those companies.
In addition to the draft terms of merger, shareholders shall be entitled to receive certain
documentation, specified in the Directive, at least one month before the date fixed for the
general meeting approving the merger. This documentation includes the annual accounts
and annual reports of the merging companies for the preceding three financial years. A
company shall be exempt from this requirement if it make such documentation available
to the public on its website during that period of time.
A merger shall require at least the approval of the general meeting with a majority of not
less than two thirds of the votes attached to the shares, equity units or subscribed capital
represented. The laws of a Member State may, however, provide that a simple majority of
the votes shall be sufficient when at least half of the subscribed capital is represented.
Protection of the rights of the employees of each of the merging companies shall be regulated
in accordance with Directive 2001/23/EC.
The laws of the Member States must provide for an adequate system of protection of the
interests of creditors of the merging companies whose claims antedate the publication of
the draft terms of merger and have not fallen due at the time of such publication. To that
end, such creditors shall be entitled to obtain adequate safeguards where the financial
situation of the merging companies makes such protection necessary.
In any event, Member States shall ensure that the creditors are authorised to apply to the
appropriate administrative or judicial authority for adequate safeguards provided that they
can credibly demonstrate that due to the merger the satisfaction of their claims is at stake
and that no adequate safeguards have been obtained from the company.
The Directive sets out the legal consequences of a merger and the civil liability of the administrative
or management bodies of the acquiring or acquired company, and limits the
cases of nullity of a merger in order to preserve legal certainty in dealings between interested
companies, between interested companies and third parties and between shareholders.
Also set forth is the regime governing merger by formation of a new company, which includes
most of the provisions laid down for the other type of merger.

Finally, where a merger by acquisition is carried out by a company which holds 90% or
more, but not all, of the shares and other securities conferring the right to vote at general
BANCO DE ESPAÑA 16 ECONOMIC BULLETIN, JULY 2011 FINANCIAL REGULATION: 2011 Q2 meetings of the company or companies being acquired, Member States shall not require
approval of the merger by the general meeting of the acquiring company if certain conditions
are fulfilled.
The Directive came into force on 1 July 2011.