Banking Supervision

Credit institutions and their consolidable groups, together with the branches of foreign credit institutions operating in Spain, are currently governed by two sets of regulations:

• On the one hand, the Ministry of Economic Affairs and Finance, which has delegated this function to the Banco de España, has the authority to set the criteria, accounting standards and the formats for individual financial statements, consolidated statements of institutions that have issued securities not accepted for official listing and of consolidated statements for capital requirement purposes, as established by Ley 26/1988, de 29 de julio.
• However, there are also criteria, accounting standards and formats for consolidated financial statements of credit institutions and consolidable groups that have issued securities accepted for official listing on a European market, which are established under Reglamentos de la Unión Europea.

Circular 4/2004 of the Banco de España on public and confidential financial information standards and financial statement formats was approved in order to modify the accounting system of Spanish credit institutions, adapting them to new accounting requirements caused by the EU adopting the International Financial Reporting Standards.

The modifications that occurred, both in Spanish legislation ( Ley 16/2007 on reform and adaptation of company law in accounting matters to be internationally standardised based on European Union regulations) and in Community legislation, led the Banco de España to approve Circular 6/2008 . This introduced changes to Circular 4/2004, mainly in relation to the definition of a group of credit institutions, formats for public financial statements, how financial instruments were reflected, including collateral, pension commitments, payments based on equity instruments, tax on profits and information to be disclosed in the explanatory notes.

However, while Circular 4/2004 aligns the Spanish accounting framework with the International Financial Reporting Standards, it needs to be kept up to date as this global framework evolves.

Lastly, in keeping with Additional Provision One of Ley 19/1988 The accounts of Spanish credit institutions must be external audited. The branches of foreign credit institutions in Spain, when they do not have to file annual accounts of their activities in Spain, must subject the accounting information that they must publish annually and the confidential information submitted to the Banco de España, to an external audit.