## [Specialized credit institutions will have to adapt to new capital requirements](/en_GB/new/specialized-credit-institutions-will-have-adapt-new-capital-requirements)
# Specialized credit institutions will have to adapt to new capital requirements
Spain - 02 / 25 / 2020
Spain Banking and Finance Alert
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**The royal decree implementing the legal regime of specialized credit institutions (EFCs - Establecimientos Financieros de Crédito) was published in the Official State Gazette on February 25. It is aimed at favoring competition in lending that will prompt orderly credit growth, according to its preamble.**
[Royal Decree 309/2020, of February 11, 2020, on the legal regime of specialized credit institutions and amending the Commercial Registry Regulations](https://www.boe.es/boe/dias/2020/02/25/pdfs/BOE-A-2020-2613.pdf), introduces new legislation having the main impact of toughening the insolvency (capital adequacy) requirements for these institutions by bringing their existing treatment, in a few cases, closer to that of credit institutions, particularly in relation to the credit quality of their liquidity reserves and the putting in place of a suitable funding structure capable of reducing stresses on liquidity at these specialized institutions.
This royal decree will come into force on July 1, 2020, except for article 30, which will do so three months after the Bank of Spain circular implementing it has been published, along with final provision two, which will enter into force on February 26, 2020, the day after its publication in the Official State Gazette.
The key components of the legal regime for specialized credit institutions (EFCs) are defined in three titles:
- Title I sets out the activity requirements for EFCs. In addition to their scope of activity, it defines the mechanisms for authorization and registration of EFCs, restrictions on conducting cross-border activities and the establishment of offices and agents, the requirements that have to be met by their capital structures and the significant interests regime, together with the suitability and disqualification regime for their senior managers.
- Title II contains the solvency (capital adequacy) requirements of EFCs, the liquidity buffer and the structure of sources of funding and maturity dates of EFCs, and their solvency reporting obligations.
- Title III is devoted to provisions on supervising compliance by EFCs with the legislation on regulation and control, and to the supervision of consolidated groups of these institutions.
EFCs are defined as institutions whose business is to provide credit through a wide range of lending financial transactions, while they are not allowed to attract returnable funds from the general public. Although that prohibition sets EFCs apart from credit institutions, their activities, which partially overlap with those of credit institutions, make it necessary to determine a regulatory framework that is conducive to consumer protection and increases legal certainty.
[Banking and Finance](/en_GB/tags/banking-and-finance), [Corporate](/en_GB/tags/corporate), [Spain](/en_GB/tags/spain)
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This publication is provided for information purposes only and does not constitute legal advice or advice of any other kind. It does not seek to offer a comprehensive summary of the legislation and developments to which it refers nor to cover all published material, but rather to provide an overview of selected topics. It is therefore recommended that the official texts be consulted and specific professional advice be sought. Garrigues does not accept any liability for the use made of this information and assumes no obligation to update it after publication.
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