Press room

Objectives and scope of banking supervision

• What are the core objectives of the Banco de España's prudential banking supervision of credit institutions? What is the Banco de España's relationship with supervisors in the insurance sector and the securities market?

  The basic purpose of banking supervision is to safeguard the stability of the financial system by supervising the solvency and the compliance with specific regulations of institutions. This does not mean that mismanaged or inefficient credit institutions do not exist (in which case, market discipline must intervene) but that the Banco de España must endeavour to minimise the effects of a possible individual banking crisis.

  From this perspective, the supervisory function of the Banco de España consists of designing and applying analysis and verification systems which provide up-to-date information on the situation of institutions and their risk profile. This information is used to adopt any pertinent measures to prevent possible crises or reduce their number, importance and cost.

  Furthermore, the Banco de España must ensure compliance with specific banking regulations, including those regarding transparency and customer protection.

  When performing its supervisory functions, the Banco de España collaborates closely with other supervisory authorities that work in the areas of securities (National Securities Market Commission) and insurance (Directorate General of Insurance). The Banco de España also collaborates with the Executive Service of the Commission for the Prevention of Money Laundering and Monetary Offences, the authority that ensures compliance with the regulations covering these areas. It should also be noted that Spain's regional governments are responsible for certain aspects of the operations undertaken by savings banks and credit co-operatives.

• What type of institutions are subject to Banco de España supervision and under what conditions?

  The Law 26/1988, of 29 July. Discipline and intervention of credit institutions. (125 KB ) confers on the Banco de España the mission to inspect and control credit institutions and their consolidated groups (the Banco de España's supervisory functions also extend to branches located abroad). Furthermore, the BE supervises the branches of foreign credit institutions in Spain, although its powers over EU institutions are limited to controlling the branch's liquidity and that it complies with regulations of general interest.

  At 31 December 2003, the Banco de España was supervising 495 institutions, of which 349 were credit institutions (80 banks, 47 saving banks, 86 credit co-operatives, 58 branches of foreign institutions and 78 specialised credit institutions).

  Apart from credit institutions, the Banco de España also supervises 24 mutual guarantee or re-guarantee companies, 55 currency exchange bureaux and 67 property valuation companies.

• What is the Basel Committee on Banking Supervision?

  The Basel Committee was created by the governors of the central banks that formed part of the Group of Ten (G10) in 1974. The Banco de España has been a full member since 2001.

  Their meetings in full session, which are held four times a year, are attended by representatives of national supervisory authorities when this function has not been conferred on the respective central banks.

  The Committee does not have formal supervisory authority at a supranational level, and therefore its conclusions do not carry the force of law. However, these conclusions are delivered in the form of recommendations and guidelines which, although not legally binding, are put into practice by supervisory authorities on a national level, thereby creating an international convergence without the need for detailed harmonisation.

  In 1988, the Committee approved the Basel Capital Accord, which stipulated minimum equity requirements of 8% based on the risk incurred, principally credit risk. This Accord was not only adopted by Committee member states, but also by practically all countries with an internationally active banking sector.

  Further information is available through this link: Basel Committee on Banking Supervision .

• How was the Basel Capital Accord reformed?

  In 1999, the Basel Committee made its first proposal to introduce a new agreement on capital adequacy which would replace that of 1988, which was successively reviewed in January 2001 and April 2003. The new Accord was based on three pillars which would allow banks and their supervisors to better assess the risks they face while conducting their activities:

  Establishment of minimum capital requirements, to allow for various options of different complexity which can be adapted to the characteristics and circumstances of each institution.

  A process developed by each institution to determine the adequacy of its capital to the risks assumed. This process must be reviewed by the supervisor who should take any corresponding prudential measures.

  Transparency of the information provided to the market to allow market discipline to function.

  Further information is available through this link: Basel Capital Accord .

• Does the Banco de España have to authorise investment in credit institutions?

  All natural or legal persons who intend to directly or indirectly purchase a qualifying holding in a credit institution must first provide the details of the transaction to the Banco de España. For these purposes, a qualifying holding is understood as at least 5% of the capital or voting rights, or at a lesser percentage if the transaction enables the holder to exercise significant influence over the institution.

  The Banco de España should also be informed of the intention to increase a qualifying holding when the percentage of the capital or voting rights exceeds one of the following thresholds: 10%, 15%, 20%, 25%, 33%, 40%, 50%, 66%, 75%.

  The obligation to inform the Banco de España also extends to any acquisition which would give the buyer control of the credit institution.

  The Banco de España has a maximum of three months in which to oppose the intended acquisition.

• Can information be obtained from the Banco de España on the financial situation of a particular credit institution?

  The Banco de España is bound by law to restrict access to the information it obtains from credit institutions in the course of its supervisory tasks, and can only disclose aggregated information on the evolution of the sector as a whole.

• What is the Banco de España's relationship with the central banks of Latin America?

  In addition to actively participating in all international supervisory forums, the Banco de España places special emphasis on its relations with Latin America. Over the last few years it has significantly increased its contacts with the banking supervisors of these countries, and has signed bilateral memorandums of understanding on supervision with the majority of Latin American supervisory authorities.