Banking Law and European Administrative Integration — Spain

Introduction

Banking law and European administrative integration in Spain describe the process through which Spanish banking supervision has become part of an integrated European administrative system. Banking regulation is no longer exercised exclusively by Spanish institutions. Instead, responsibilities are shared among the European Central Bank (ECB), Banco de España, European Banking Authority (EBA), Single Resolution Board (SRB), Spanish resolution authorities, and other EU and national institutions.

The most important development was the establishment of the Single Supervisory Mechanism (SSM) under Council Regulation (EU) No. 1024/2013. Since 4 November 2014, the SSM has exercised the supervisory powers conferred upon it, combining the ECB with national competent authorities such as Banco de España.

European administrative integration therefore does not simply mean harmonising Spanish banking statutes with EU legislation. It also means creating administrative networks in which European and Spanish authorities jointly supervise institutions, exchange information, conduct investigations, adopt decisions and manage banking crises.

Legal and Regulatory Framework

1. Treaty on the Functioning of the European Union

The Treaty on the Functioning of the European Union provides the constitutional foundation for European banking integration.

Article 127(6) TFEU permits specific prudential-supervision tasks concerning credit institutions and other financial institutions to be conferred upon the ECB.

This provision became the legal foundation for the Single Supervisory Mechanism.

The arrangement is significant because the ECB, originally created primarily as a monetary authority, became an important European banking supervisor.

2. Single Supervisory Mechanism

Council Regulation (EU) No. 1024/2013 established the SSM.

The system combines the ECB with national competent authorities of participating Member States. The ECB is the central prudential supervisor, while national authorities continue performing important supervisory functions within the integrated system.

Spain therefore participates through Banco de España.

The ECB directly supervises significant Spanish banking institutions in cooperation with Banco de España. Less significant institutions are normally supervised directly by Banco de España within the SSM framework, although the ECB retains important oversight powers and can assume direct supervision when necessary to ensure consistent supervisory standards.

Spanish Legal Framework

Spanish banking supervision continues to depend upon domestic legislation.

Important legislation includes:

Law 13/1994 on the Autonomy of Banco de España, which establishes important institutional and supervisory responsibilities of the Spanish central bank.

Law 10/2014 on the regulation, supervision and solvency of credit institutions establishes major Spanish rules concerning banking authorisation, prudential supervision, governance and sanctions.

However, these national powers operate without prejudice to supervisory responsibilities transferred to the ECB under Regulation 1024/2013.

This creates a multi-level administrative system rather than two entirely separate regulatory regimes.

The European Single Rulebook

European administrative integration is supported by the EU banking Single Rulebook.

Important components include the Capital Requirements Regulation and Capital Requirements Directive framework, rules on bank recovery and resolution, deposit protection and numerous regulatory and implementing technical standards.

The objective is to reduce differences between national banking systems and ensure that institutions competing within the internal market face broadly consistent prudential standards.

The EBA has an important role in promoting consistent implementation of the Single Rulebook throughout the European banking sector.

Administrative Cooperation Between ECB and Banco de España

Cooperation between European and Spanish administrators is particularly visible in everyday supervision.

For significant Spanish banks, Joint Supervisory Teams can combine ECB personnel with officials from national competent authorities.

Information gathered nationally may therefore become part of a European supervisory assessment.

Supervisory activities can involve:

examination of capital and liquidity;

governance assessments;

internal-model reviews;

risk-management evaluation;

supervisory inspections;

qualifying-holding assessments;

authorisation procedures; and

corrective measures.

This illustrates composite administration: several authorities contribute to a regulatory process even though the ultimate legal decision may formally belong to one authority.

Banking Authorisation

Bank authorisation provides an especially clear example of administrative integration.

Within the SSM, decisions concerning authorisation or withdrawal of authorisation of relevant Spanish credit institutions fall within the ECB framework. Banco de España assesses applicable national requirements and participates in the procedure before the final European decision is made.

Thus, a procedure may begin within Spanish administration but conclude through an EU institution.

This interconnected process raises important questions concerning procedural rights, judicial review and responsibility.

Significant and Less Significant Institutions

The SSM distinguishes between significant institutions and less significant institutions.

Major institutions are directly supervised by the ECB.

Less significant institutions are normally directly supervised by national competent authorities such as Banco de España, subject to the ECB's oversight and the integrated SSM framework.

This model combines centralisation with administrative decentralisation.

It allows local supervisory knowledge to remain important while promoting consistent European standards.

Single Resolution Mechanism

Administrative integration extends beyond ordinary supervision.

The Single Resolution Mechanism (SRM) deals with failing banks and is another central pillar of Banking Union.

It combines the Single Resolution Board, national resolution authorities and the Single Resolution Fund. Its objectives include protecting financial stability, reducing the economic effects of bank failures and limiting reliance upon taxpayer-funded rescues.

Consequently, a major Spanish banking crisis can trigger coordinated decision-making at both national and European levels.

Administrative Sanctions

European banking supervision also includes enforcement and sanctioning.

Depending upon the applicable legislation and type of violation, responsibilities can involve either European or national authorities.

This creates difficult legal questions because conduct may be investigated nationally while European legislation determines substantive requirements or the ECB participates in the final supervisory process.

Administrative sanctions must nevertheless comply with fundamental procedural safeguards, including proportionality, legal certainty, rights of defence and effective judicial protection.

Judicial Review

European administrative integration makes judicial review particularly important.

A purely Spanish administrative decision will ordinarily fall within Spain's judicial-review system.

A final ECB supervisory decision, however, may be challenged through the EU judicial system under the conditions established by EU law.

Composite procedures can therefore raise the difficult question of whether the relevant act should be reviewed by a Spanish court or the EU Courts.

Banking Union case law has progressively clarified this division of judicial responsibility. An EU Parliament study of the first decade of Banking Union jurisprudence identifies more than 300 actions concerning ECB supervisory and SRB resolution decisions.

Case Laws

1. Landeskreditbank Baden-Württemberg v ECB (L-Bank), C-450/17 P

L-Bank challenged its classification as a significant institution subject to direct ECB supervision.

The litigation became one of the foundational cases concerning the structure of the SSM.

The EU Courts interpreted the SSM as giving the ECB important supervisory competence exercised through an integrated framework involving national competent authorities.

Importance for Spain: Banco de España's role in supervising less significant Spanish institutions must be understood within the wider SSM architecture rather than as completely independent national supervision.

2. Berlusconi and Fininvest, C-219/17

This landmark case concerned a composite administrative procedure involving national authorities and the ECB in the assessment of a qualifying holding in a credit institution.

The Court addressed which judicial system should review preparatory national measures where the final legally binding decision belongs to an EU institution.

Importance for Spain: A Spanish administrative authority may participate in preparing an ECB banking decision, but the integrated nature of the procedure can affect where judicial review ultimately occurs.

3. Crédit Mutuel Arkéa v ECB, T-712/15 and T-52/16

The General Court considered ECB supervisory decisions involving prudential supervision on a consolidated basis.

The litigation helped clarify the extent of ECB authority under the SSM framework.

Importance for Spain: Spanish banking groups operating through complicated corporate structures can be subject to European consolidated supervision rather than purely entity-by-entity national administration.

4. Trasta Komercbanka and Others v ECB, C-663/17 P, C-665/17 P and C-669/17 P

These proceedings concerned the withdrawal of a credit institution's authorisation and questions regarding standing and judicial protection.

The case demonstrates that supervisory decisions affecting the continued existence of a bank can produce complex procedural questions concerning who may challenge an ECB measure.

Importance for Spain: Effective judicial protection remains essential even within a highly integrated European supervisory system.

5. ECB v Crédit Lyonnais, C-389/21 P

The litigation concerned the ECB's prudential assessment relating to calculation of the leverage ratio and the treatment of certain exposures.

The Court examined the ECB's exercise of supervisory discretion and the requirements applicable to that discretion.

Importance for Spain: ECB supervisory decisions affecting Spanish institutions must be based upon proper assessment and remain subject to judicial scrutiny even where the supervisor possesses technical discretion.

6. Fédération bancaire française v ACPR, C-911/19

The Court considered the legal effects and judicial review of EBA guidelines.

The judgment is particularly significant because European administrative integration frequently operates through instruments such as guidelines rather than conventional legislation.

Importance for Spain: European banking governance is influenced not only by regulations and directives but also by EBA supervisory instruments that seek consistent administrative practices throughout Member States.

7. Banco Santander and Santusa v Commission, Joined Cases C-53/14 P and C-65/14 P

These cases concerned Spanish tax treatment and EU State-aid rules.

Although principally State-aid litigation, they illustrate how Spanish financial and administrative measures remain subject to supranational EU review.

Importance for banking integration: National financial policy cannot be examined solely under Spanish administrative law when EU competition and internal-market requirements apply.

8. Banco Popular Resolution Litigation

The 2017 resolution of Banco Popular Español generated extensive litigation involving the SRB, ECB and European Commission.

The litigation illustrates European administrative integration particularly clearly because supervision, determination of bank failure, resolution planning and implementation involved several European and national actors.

Subsequent proceedings have continued to clarify responsibility, admissibility, damages and judicial review within the Banking Union framework. For example, the General Court issued an order in La Guirigaña and Others v ECB and SRB, T-613/17, in January 2025 concerning annulment and damages claims connected with Banco Popular's resolution.

The Principle of Primacy of EU Law

European administrative integration depends upon the primacy of EU law.

Spanish administrative authorities and courts must give effect to applicable EU banking legislation.

Where a directly applicable EU rule conflicts with incompatible national legislation, the EU-law requirements take precedence according to established principles of EU law.

This is particularly important because banking regulation combines EU regulations, directives implemented through Spanish legislation, ECB measures and national administrative rules.

Application of Spanish Law by the ECB

One of the most distinctive features of European banking administration is that the ECB may sometimes have to apply national legislation.

Article 4(3) of the SSM Regulation requires the ECB to apply relevant Union law and, where EU law consists of directives, the national legislation implementing those directives.

Consequently, the European supervisor may have to interpret and apply Spanish banking legislation when supervising Spanish institutions.

This is an unusually deep form of administrative integration because an EU institution can directly administer rules originating partly from national legislation.

Fundamental Rights

Integrated banking administration must respect fundamental rights.

Important protections include:

right to good administration;

right to be heard;

access to relevant files;

protection of confidential information;

proportionality;

legal certainty;

rights of defence; and

effective judicial protection.

These safeguards are particularly important during investigations, licence withdrawals and administrative sanctions.

Administrative efficiency cannot eliminate procedural fairness.

Information Sharing and Confidentiality

Integrated supervision requires extensive information exchange.

Banco de España, the ECB and other competent authorities may need access to prudential information concerning Spanish banks.

However, supervisory information can include commercially sensitive and confidential material.

European integration therefore requires both information sharing and professional secrecy.

Authorities must be capable of exchanging information necessary for supervision without making confidential banking information freely available.

Benefits of European Administrative Integration

The integrated system provides several potential advantages.

It reduces opportunities for regulatory arbitrage between participating countries and encourages common supervisory standards.

It also allows risks involving large cross-border banks to be examined from a European perspective rather than solely from the perspective of one Member State.

The Banking Union was specifically designed to strengthen banks, reduce regulatory fragmentation and improve financial stability.

Legal Challenges

European administrative integration nevertheless creates complexity.

The ECB may apply EU regulations together with Spanish legislation implementing EU directives. Banco de España may act independently for some responsibilities while participating within the SSM for others.

A single supervisory matter can therefore involve several bodies and several levels of law.

The principal legal challenge is maintaining a clear division of responsibility while ensuring accountability and effective judicial protection.

Conclusion

Banking law and European administrative integration in Spain represent a major transformation from predominantly national banking supervision toward multi-level European financial administration.

The system is principally built around the Single Supervisory Mechanism, ECB, Banco de España, European Banking Authority, Single Resolution Mechanism and Single Resolution Board, together with EU banking legislation and Spanish implementing law. Since 2014, the ECB and Banco de España have operated within an integrated supervisory framework in which European and national administrative responsibilities are closely interconnected.

The cases of L-Bank v ECB, Berlusconi and Fininvest, Crédit Mutuel Arkéa v ECB, Trasta Komercbanka v ECB, ECB v Crédit Lyonnais, Fédération bancaire française v ACPR, Banco Santander/Santusa v Commission, and the Banco Popular litigation demonstrate important principles concerning supervisory competence, composite administrative procedures, judicial review, discretion, EBA measures and bank resolution.

The central principle is that Spanish banking administration now operates as part of an integrated European system rather than as an isolated national regulatory structure. Effective integration therefore requires close administrative cooperation, consistent application of EU rules, clear allocation of responsibilities, confidentiality, procedural fairness and effective judicial review.