Updates Corporate 17-2012
SPANISH FINANCIAL SECTOR REFORM – MAY 2012
On 11 May 2012, the Spanish Government has announced yet another reform of the financial sector under Royal Decree-Law 18/2012 on clean up and sale of property assets held by financial entities (“Royal Decree-Law 18/2012”), which was published in the Official State Gazette and entered into force on 12 May.
Royal Decree-Law 18/2012 is a second attempt by this Administration, after February’s Royal Decree-Law 2/2012, to restore confidence in the Spanish financial sector, which has been suffering of late as a consequence of continuing value deterioration in troubled property portfolios sitting in lenders’ balance sheets.
Royal Decree-Law 2/2012 dealt with problematic property assets and stepped up provision and bank capital requirements along the year 2012 (2013 for banks involved in concentration or merger processes).
Royal Decree-Law 18/2012mainly focuses on:
- The introduction of increased provision requirements for property-related loans, but this time for those qualifying as ordinary (non-delinquent) risk. Following the trend of Royal Decree-Law 2/2012, Banks are required to provide details to the Bank of Spain about the manner in which they plan to meet the extra requirements.
- Ensuring the financial support of the Fund for Orderly Bank Restructuring (FROB) for those institutions having trouble to comply with the additional capital charges.
- Transferring out foreclosed assets acquired from land and construction developers into separate entities managed independently from the relevant lender.
1. EXTRA PROVISION REQUIREMENTS
1.1 Amount of the required provisions
1.2 Term for compliance
1.3 Compliance plan
1.4 Non-compliance of the plan
1.5 Authorisations to the Minister of Economy and Competitiveness and the Bank of Spain
2. FINANCIAL SUPPORT FROM FROB
3. PROPERTY ASSETS’ HIVE-OFF
3.1 Compulsory transfer of property assets
3.2 Special rules applicable to FROB-funded institutions
3.3 Support of the acquisition of equity in asset management companies
3.4 Term for the transfer of property assets
3.5 Valuation of the transferred property assets
3.7 Tax treatment of transfers of property to asset management companies
3.8 Notary and registry fees
4. OTHER RELEVANT PROVISIONS OF ROYAL DECREE-LAW 18/2012
4.1 Extension of the term to apply for authorisation of concentration processes
4.2 Amendment of FROB regulations
4.3 Exceptional treatment of outstanding preferred shares and other securities
4.4 Exemption of income deriving from the transfer of certain properties