Banking Law and Experimental Governance Systems in Spain

1. Introduction

Experimental governance systems in Spanish banking law refer to regulatory mechanisms through which the Spanish authorities can test new financial technologies, business models, supervisory methods and regulatory approaches in a controlled environment before allowing them to operate on a wider commercial scale.

The most important Spanish example is the financial regulatory sandbox, established by Law 7/2020 of 13 November on the Digital Transformation of the Financial System (Ley 7/2020, de 13 de noviembre, para la transformación digital del sistema financiero).

The Spanish model is particularly important because it combines:

1. Innovation
2. Banking supervision
3. Consumer protection
4. Financial stability
5. Data protection
6. Anti-money-laundering controls
7. Regulatory learning
8. Cooperation between different financial authorities

Thus, experimental governance does not mean that banks or fintech companies are exempted from law. Rather, it means that innovation is tested under controlled legal and supervisory conditions.

2. Meaning of Experimental Governance in Banking

Traditional banking regulation normally follows a relatively fixed model:

Law → licence → supervision → enforcement

Experimental governance introduces an additional stage:

Innovation → controlled experiment → regulatory observation → evaluation → possible authorisation/regulatory reform

This is particularly useful where technology develops faster than legislation.

Examples include:

• Artificial intelligence in credit assessment
• Blockchain-based payments
• Tokenisation of financial assets
• Digital identity
• RegTech
• automated investment advice
• alternative credit-scoring systems
• biometric authentication
• innovative payment systems
• distributed-ledger technology
• digital insurance products.

Spain's sandbox is expressly designed to allow technology-based financial innovation to be tested while maintaining safeguards for users and the financial system.

3. Legal Foundation: Law 7/2020

The principal legal foundation is Law 7/2020.

Its purpose is not simply to promote fintech businesses. It also seeks to give regulators better instruments for understanding technological transformation.

The law establishes a controlled testing environment in which innovative financial projects can operate under agreed conditions and supervisory monitoring.

Important principle

Participation in the sandbox does not itself grant a banking licence or authorisation to conduct a reserved financial activity commercially.

This distinction is fundamental.

For example:

A fintech company may test an innovative payment technology in the sandbox, but participation does not automatically authorise it to operate as a bank or payment institution outside the sandbox.

The legislation expressly states that sandbox participation does not constitute authorisation to commence a reserved financial activity or provide financial services indefinitely.

4. Objectives of Experimental Governance

Spanish experimental financial governance has several objectives.

A. Promoting innovation

The system allows innovators to test products without immediately confronting all of the uncertainties associated with applying traditional regulatory frameworks to new technology.

B. Protecting consumers

Experiments must be designed so that participants are protected from unacceptable financial risks.

C. Protecting financial stability

An innovative technology should not be allowed to create systemic risks merely because it is technologically innovative.

D. Improving supervision

Regulators themselves learn from experiments.

This is a major feature of experimental governance.

The regulator is not simply asking:

"Is this legal?"

It can also ask:

"How should the law and supervisory framework respond to this technology?"

E. Improving future regulation

The experience obtained from experiments can reveal:

• regulatory gaps;
• unnecessary regulatory barriers;
• risks not previously identified;
• consumer-protection problems;
• technological vulnerabilities.

The Banco de España specifically describes the sandbox as an instrument that can improve regulation and financial supervision.

5. Who Governs the Spanish Financial Sandbox?

Experimental governance is multi-institutional.

Important institutions include:

1. Banco de España

The Banco de España plays a central role where projects concern banking, payments and other matters within its supervisory competence.

Its responsibilities include:

• evaluating projects;
• entering into testing protocols;
• approving participant-information documents;
• monitoring testing;
• appointing monitors;
• reviewing results;
• preparing conclusions.

The Banco de España's current sandbox procedure expressly identifies these responsibilities.

2. CNMV

The Comisión Nacional del Mercado de Valores (CNMV) supervises matters relating to securities and investment markets.

3. DGSFP

The Dirección General de Seguros y Fondos de Pensiones (DGSFP) is relevant to insurance and pension-related innovation.

4. Treasury / SGTFI

The Secretaría General del Tesoro y Financiación Internacional coordinates the sandbox framework.

5. SEPBLAC

The Spanish authority responsible for preventing money laundering and terrorist financing participates where AML/CFT risks arise.

6. AEPD

The Agencia Española de Protección de Datos is relevant where experimental financial projects involve personal data.

The coordination structure therefore illustrates a major characteristic of experimental governance: regulation is distributed among several specialised authorities rather than being exercised by a single banking regulator.

6. Eligibility Requirements

Article 5 of Law 7/2020 establishes important access requirements.

A project should generally:

1. Be technologically innovative

The innovation must be technology-based and applicable to the financial system.

2. Be sufficiently developed

A merely theoretical idea is insufficient.

The project should be sufficiently advanced to undergo actual testing.

3. Provide potential added value

The innovation should provide value in at least one area, such as:

• facilitating regulatory compliance;
• benefiting financial consumers;
• increasing efficiency;
• improving markets;
• improving regulation;
• improving financial supervision.

4. Consider systemic impact

Authorities must consider the potential impact of the project on the Spanish financial system.

7. The Three-Stage Experimental Governance Model

The Spanish sandbox essentially operates through three stages:

Stage I — Access

The promoter submits an application.

The competent authorities evaluate the proposal against the statutory criteria.

The Treasury coordinates the process.

Stage II — Testing

If the project receives a favourable assessment, the promoter and relevant supervisory authority establish a testing protocol.

The protocol determines matters such as:

• scope of testing;
• duration;
• participants;
• safeguards;
• monitoring;
• reporting;
• risk controls;
• termination conditions.

Where real consumers participate, informed consent and appropriate safeguards are required.

Stage III — Exit

After testing, the regulator examines the results.

The project may:

• proceed toward ordinary regulatory authorisation;
• be modified;
• be discontinued;
• reveal regulatory barriers;
• generate information for future regulatory reform.

The Banco de España describes this access-testing-exit structure expressly.

8. Why the "Law + Protocol" Model Is Important

One of the most interesting features of Spanish experimental governance is the combination of:

general legislation + project-specific testing protocol

Law 7/2020 describes the sandbox as an environment structured around a controlled space, supervisory instrument, and law-protocol scheme.

This creates flexibility.

The legislation establishes the general legal boundaries, while the protocol can establish operational conditions appropriate to the individual experiment.

Example

Suppose a fintech wants to test an AI system for assessing small-business creditworthiness.

The law provides the overall legal framework.

The testing protocol may then specify:

• number of customers;
• maximum credit exposure;
• data sources;
• algorithm monitoring;
• human review;
• complaints mechanism;
• testing period;
• reporting requirements.

This is much more adaptable than attempting to write one statute covering every possible future AI-credit technology.

9. Experimental Governance and Consumer Protection

Innovation cannot override consumer protection.

Spanish experimental governance therefore incorporates safeguards concerning:

Informed consent

Participants should understand that they are participating in a controlled experiment.

Financial guarantees

Appropriate guarantee and indemnification mechanisms may be required.

Transparency

Consumers should receive information necessary to understand the experiment and associated risks.

Data protection

Personal data must remain protected.

Complaints

Participants must have mechanisms for raising concerns.

AML/CFT

Innovative technology cannot be used as a route around anti-money-laundering requirements.

The Banco de España specifically identifies data protection, financial-user protection and prevention of money laundering and terrorist financing as important public-policy objectives that must remain protected.

10. Experimental Governance and Banking Supervision

Experimental governance does not replace ordinary banking supervision.

Instead, it complements it.

Spain remains subject to the wider European banking framework, including:

• European Central Bank supervision;
• Single Supervisory Mechanism;
• European Banking Authority standards;
• EU prudential rules;
• capital requirements;
• AML requirements;
• consumer-protection legislation;
• recovery and resolution rules.

Spanish law also contains specific legislation concerning recovery and resolution of credit institutions, including Law 11/2015 and Law 10/2014 on the organisation, supervision and solvency of credit institutions.

Therefore:

Experimental governance operates inside the banking regulatory system; it does not replace the banking regulatory system.

11. Experimental Governance and AI

AI presents one of the clearest reasons why experimental governance is becoming important.

Banks increasingly use algorithms for:

• credit scoring;
• fraud detection;
• AML monitoring;
• customer identification;
• risk assessment;
• investment advice;
• cybersecurity;
• customer service.

The legal difficulty is that traditional banking rules may not answer every question concerning algorithmic decision-making.

For example:

Can a bank deny a loan using an AI model that the customer cannot understand?

This raises questions involving:

• transparency;
• discrimination;
• explainability;
• data protection;
• accountability;
• consumer protection;
• prudential risk.

A sandbox allows regulators to identify such problems before the technology is deployed at massive scale.

12. Experimental Governance and FinTech

Fintech is perhaps the principal practical field for experimental governance.

Possible sandbox experiments include:

The important legal principle is:

Innovation is permitted to be tested, but risks are controlled rather than ignored.

13. Experimental Governance and Regulatory Learning

One of the most important theoretical aspects is regulatory learning.

Traditional regulation assumes that the regulator knows enough to make a permanent rule.

Experimental governance accepts that:

regulators may not initially know the correct regulatory response to a new technology.

Therefore, the regulator gathers evidence.

Regulatory learning cycle

Technology

↓

Controlled testing

↓

Evidence

↓

Supervisory assessment

↓

Identification of risks

↓

Regulatory adjustment

↓

Permanent framework

This transforms the regulator from merely an enforcer of existing rules into an institution capable of learning from experimentation.

Banco de España research on the Spanish sandbox specifically examines how participating projects evolved and how the sandbox can improve the innovation ecosystem and supervisory understanding.

14. Case Law Relevant to Experimental Banking Governance

A crucial academic point is that Spanish case law specifically interpreting Law 7/2020's sandbox is still relatively limited compared with the extensive jurisprudence on traditional banking products.

Therefore, for examination purposes, it is better to use important Spanish and EU banking cases to establish the legal principles that constrain experimental banking governance.

Case 1 — Bankia / Bankia Prospectus Litigation

Tribunal Supremo, Civil Chamber, STS 2461/2022, 22 June 2022

The Spanish Supreme Court considered claims concerning the acquisition of Bankia shares.

The Court found that an investor's reliance on inaccurate information in the Bankia prospectus could constitute an excusable error where the investor did not possess special information enabling it to discover the inaccuracies.

The case illustrates an important principle:

Financial innovation cannot reduce the regulator's or bank's responsibility for accurate financial information.

For experimental governance, this means that a new technology cannot be justified simply because it is innovative. Investors and customers must still receive reliable information.

Significance

This case supports:

• transparency;
• investor protection;
• informational responsibility;
• accountability of financial institutions.

15. Case 2 — STS 3919/2019: Financial Derivative and Informed Consent

Tribunal Supremo, 16 December 2019

The Supreme Court considered a derivative connected with a mortgage loan.

The Court recognised that lack of adequate information about the cost and mechanics of early cancellation could contribute to a legally relevant error in consent.

Principle

Complex financial products require appropriate information.

Experimental governance relevance

Suppose a sandbox tests an innovative derivative or automated financial product.

The innovation cannot eliminate:

• informed consent;
• transparency;
• suitability/information requirements.

Thus:

The more technologically complex the product, the more important effective information becomes.

16. Case 3 — STS 40/2020: Subordinated Debt

Tribunal Supremo, 16 January 2020

The Supreme Court dealt with damages arising from failure to comply with legal advisory and information duties in the sale of subordinated debt.

The Court held that when calculating damages, benefits received from the investment could have to be taken into account so that compensation reflected the actual net loss.

Importance for experimental governance

This demonstrates that financial innovation operates within an established framework of:

• advisory duties;
• information duties;
• causation;
• damages;
• proportional compensation.

A sandbox cannot be used to avoid civil liability.

17. Case 4 — STS 3944/2019: Complex Swaps

The Spanish Supreme Court held that inadequate information concerning a complex swap and its cancellation consequences could contribute to an excusable error.

The Court emphasised:

• special information duties;
• the complexity of derivatives;
• the importance of pre-contractual transparency;
• protection of less sophisticated customers.

Experimental-governance lesson

When regulators permit an innovative financial product to be tested:

innovation must be accompanied by enhanced risk communication.

18. Case 5 — Gutiérrez Naranjo

CJEU, Joined Cases C-154/15, C-307/15 and C-308/15, 21 December 2016

This major EU consumer-banking decision concerned Spanish mortgage floor clauses (cláusulas suelo).

The CJEU strengthened the principle that unfair contractual terms cannot simply remain effective against consumers.

Relevance

Experimental governance must comply with EU consumer law.

Therefore:

A sandbox cannot become a "consumer-law-free zone."

Even innovative banking products remain subject to fundamental consumer-protection principles.

The subsequent Spanish jurisprudence applied these principles to restitution and banking disputes.

19. Case 6 — CJEU, Caixabank and Other Spanish Banks, C-810/21 to C-813/21

CJEU, 25 January 2024

These cases involved Spanish mortgage-loan costs and the limitation period for restitution following an unfair contractual term.

The Court examined the relationship between EU consumer protection and national procedural rules.

Experimental governance relevance

The case demonstrates that Spanish financial experimentation must operate within EU constitutional and consumer-protection constraints.

Regulatory experimentation cannot undermine the effectiveness of EU consumer rights.

20. Case 7 — Banco Popular Resolution Litigation

The Banco Popular resolution is particularly important for understanding modern Spanish banking governance.

Banco Popular was resolved under the European banking-resolution framework and its shares were ultimately transferred to Banco Santander.

Spanish and EU litigation subsequently examined the legal consequences for shareholders and investors.

The Spanish Supreme Court in STS 5185/2025, 12 November 2025, applying the CJEU's interpretation of the Bank Recovery and Resolution Directive, held that certain post-resolution claims based on the acquisition of Banco Popular shares could not be maintained where they would undermine the effects of the resolution framework.

Importance

This demonstrates that banking governance is not simply about individual contractual rights.

It must also protect:

• financial stability;
• resolution effectiveness;
• systemic stability;
• continuity of critical banking functions.

Therefore, experimental governance must ultimately respect the public-interest dimension of banking regulation.

21. Case 8 — STS 4955/2025: Opening Commission

The Spanish Supreme Court considered a consumer loan containing a 2.17% opening commission.

The Court held that, in the circumstances, the commission was disproportionate and therefore abusive.

The judgment reaffirmed that assessment of such clauses requires consideration of proportionality and the services remunerated.

Experimental-governance significance

If a fintech develops an innovative lending model, the technological novelty does not automatically validate its pricing model.

The regulator and courts can still examine:

• proportionality;
• fairness;
• transparency;
• consumer disadvantage.

22. Case 9 — Multicurrency Mortgage Jurisprudence

Spanish Supreme Court jurisprudence concerning multicurrency mortgages has repeatedly examined whether consumers received comprehensible information about currency risks.

A 2025 Supreme Court decision, for example, considered whether simulations supplied by the bank adequately explained the potential increase in instalments and outstanding principal caused by exchange-rate movements.

Lesson for experimental governance

Innovative financial products should be accompanied by:

scenario testing + risk disclosure + understandable information.

This is especially important when algorithms or sophisticated financial technologies make risks difficult for consumers to understand.

23. Core Principles Derived from the Case Law

The case law produces several principles relevant to experimental banking governance.

Principle 1 — Innovation does not eliminate responsibility

A bank cannot escape liability by saying:

"The technology made the decision."

The financial institution remains responsible for its legal obligations.

Principle 2 — Transparency is fundamental

Customers must receive sufficient information about significant risks.

Principle 3 — Consumer protection remains applicable

Experimental products cannot be designed around the assumption that ordinary consumer law does not apply.

Principle 4 — Proportionality matters

Fees, risks and contractual obligations must be proportionate.

Principle 5 — Financial stability has public importance

The Banco Popular resolution demonstrates that banking regulation protects not only individual customers but also the stability of the financial system.

Principle 6 — EU law limits national experimentation

Spanish experimental governance operates within:

• EU banking law;
• EU consumer law;
• EU data protection;
• AML/CFT requirements;
• Single Supervisory Mechanism;
• Single Resolution Mechanism.

24. Experimental Governance vs Traditional Regulation

25. Advantages of the Spanish Model

1. Encourages fintech innovation

Start-ups can test ideas without immediately making large-scale investments.

2. Reduces regulatory uncertainty

Direct communication with supervisors can clarify regulatory issues.

3. Improves supervisory knowledge

Regulators obtain practical information about new technologies.

4. Protects consumers

Testing occurs in a controlled environment.

5. Detects systemic risks

Authorities can identify technological vulnerabilities before mass adoption.

6. Encourages regulatory cooperation

Banco de España, CNMV, DGSFP and other authorities can coordinate.

26. Limitations

Experimental governance also presents difficulties.

A. Regulatory uncertainty

A successful sandbox test does not necessarily mean the product will receive a full licence.

B. Limited scale

Testing conditions may not perfectly reproduce the risks of mass-market deployment.

C. Regulatory fragmentation

Fintech products can simultaneously involve:

• banking;
• securities;
• insurance;
• payments;
• data protection;
• AML.

Several regulators may therefore be involved.

D. Consumer experimentation risks

Even with safeguards, real customers may be exposed to unfamiliar products.

E. Regulatory capture

Close communication between innovators and regulators must not become preferential treatment.

F. Unequal access

Large financial institutions may possess greater resources to navigate complex regulatory experimentation than small start-ups.

27. Recent Development: Reform of the Spanish Sandbox

An important current development is that Spain has been working on reforming the financial sandbox.

In July 2026, the Spanish Government announced an anteproyecto de ley aimed at relaunching the financial sandbox and making the mechanism more agile and secure. The reform was presented together with the Banco de España, CNMV and DGSFP.

At the same time, the existing Law 7/2020 framework remains operational: the Treasury announced the 12th sandbox cohort, with applications running from 1 September to 13 October 2026.

This is particularly significant because it shows that experimental governance itself is being experimented with and reformed.

28. Present Structure of Spanish Experimental Banking Governance

A simplified structure can be represented as:

Spanish Government / Treasury

↓

Financial Sandbox

↓

Banco de España — banking & payment innovation

CNMV — securities/investment innovation

DGSFP — insurance/pension innovation

↓

SEPBLAC — AML/CFT

AEPD — data protection

↓

Testing Protocol

↓

Controlled Experiment

↓

Supervisory Monitoring

↓

Results & Conclusions

↓

Authorisation / Modification / Termination / Regulatory Reform

This is a classic example of multi-level experimental governance.

29. Important Examination Point

For a law examination, it is useful to distinguish three concepts:

Regulatory Sandbox

A controlled environment for testing innovative financial products, services or business models.

Regulatory Experimentation

The broader process of using temporary or controlled regulatory arrangements to learn how regulation should work.

Experimental Governance

The widest concept, involving:

government + regulators + financial institutions + technology firms + consumers + data + continuous regulatory learning.

Therefore:

The Spanish financial sandbox is an instrument of experimental governance, but experimental governance is broader than the sandbox itself.

30. Conclusion

Spain represents an important modern model of experimental banking governance.

The traditional approach to banking regulation was primarily based on:

prescription + licensing + supervision + enforcement.

The Spanish approach increasingly adds:

experimentation + monitoring + regulatory learning + adaptation.

Law 7/2020 provides the central framework for this transformation. Its controlled testing environment allows innovative financial technologies to be tested under supervisory conditions while maintaining safeguards for financial stability, consumers, personal data and AML/CFT objectives.

The case law reinforces the boundaries of experimentation: innovation cannot override transparency, consumer protection, informed consent, proportionality, civil liability or financial stability.

The most important cases for an examination answer are therefore:

1. STS 2461/2022 — Bankia prospectus/investor information
2. STS 3919/2019 — derivatives and informed consent
3. STS 3944/2019 — complex swaps and information duties
4. STS 40/2020 — subordinated debt and damages
5. Gutiérrez Naranjo, CJEU — unfair mortgage clauses
6. Caixabank & Others, C-810/21 to C-813/21 — mortgage costs/restitution
7. Banco Popular resolution jurisprudence — banking resolution and financial stability
8. STS 4955/2025 — proportionality of banking charges

Overall principle: Spanish experimental governance seeks to create a balance between financial innovation and regulatory protection: "innovate, but under supervision; experiment, but with safeguards; learn, but without sacrificing financial stability or consumer rights."