Banking Law and Financial Restructuring Agencies in Spain

Introduction

Spain’s banking restructuring framework developed substantially after the 2008 financial crisis. The central institutional objective is to preserve financial stability, maintain essential banking services, protect covered depositors, and reduce reliance on extraordinary public support. The principal Spanish restructuring and resolution authority is the FROB (Fondo de Reestructuración Ordenada Bancaria). It works alongside the Banco de España, the European Central Bank (ECB) and, for banks within the Single Resolution Mechanism, the Single Resolution Board (SRB/JUR).

Historically, FROB was created in 2009 to support restructuring and recapitalisation of Spanish credit institutions. The framework was subsequently strengthened through Law 9/2012 and, following the EU Bank Recovery and Resolution Directive (BRRD), Law 11/2015.

Legal and Regulatory Framework

1. FROB

FROB is Spain’s executive resolution authority for credit institutions and certain investment firms. Under Law 11/2015, its role includes implementing resolution measures when the statutory conditions for resolution are satisfied.

Its powers can include:

• Sale of the business or shares;
• Transfer of assets and liabilities;
• Creation or use of a bridge institution;
• Asset-management arrangements;
• Bail-in or internal recapitalisation;
• Reduction or conversion of capital instruments;
• Approval and supervision of restructuring plans.

2. Banco de España

Banco de España performs preventive resolution functions for credit institutions. It participates in resolution planning and evaluates obstacles to resolvability. For significant institutions, the ECB generally determines whether the bank is failing or likely to fail, while FROB performs the subsequent Spanish-law functions concerning resolution.

3. Single Resolution Board

For institutions covered by the European Banking Union, the SRB/JUR is central to resolution decisions. Spain’s FROB implements the relevant European resolution decisions domestically. The Single Resolution Mechanism includes national resolution authorities, the SRB and the Single Resolution Fund.

4. Law 11/2015

Law 11/2015 provides Spain’s principal modern statutory framework for recovery and resolution. Its stated purpose is to regulate early intervention and resolution and establish FROB as the executive resolution authority while protecting financial stability and limiting public-resource use.

The legislation also establishes bail-in, whereby shareholders and certain creditors can bear losses through write-down or conversion of financial instruments. Where a reorganisation plan is required, FROB can approve and monitor that plan.

5. SAREB

Another important institution arising from the post-crisis restructuring framework is SAREB (Sociedad de Gestión de Activos Procedentes de la Reestructuración Bancaria). It was created to receive and manage problematic real-estate-related assets transferred from banks undergoing restructuring. Banco de España has supervisory functions concerning SAREB under the applicable legislation.

Role of Financial Restructuring Agencies

Spanish restructuring agencies and authorities perform several interconnected functions.

First, early intervention: authorities seek to identify financial deterioration before an institution reaches failure.

Second, restructuring: viable institutions may be reorganised, recapitalised, merged or have problematic assets separated.

Third, resolution: where an institution is failing or likely to fail and public-interest conditions are satisfied, resolution tools can be used instead of ordinary insolvency.

Fourth, burden allocation: the modern framework seeks to ensure that shareholders and creditors absorb losses according to the statutory hierarchy before extraordinary public support is used.

Fifth, continuity: resolution is designed to preserve essential functions and reduce systemic disruption. The official framework identifies continuity of critical functions, financial stability, protection of covered depositors and minimisation of extraordinary public support among its objectives.

Important Case Laws

1. Torró Visión Holding, S.L. v FROB, Spanish Supreme Court, Judgment 1180/2018

The Spanish Supreme Court considered FROB measures implementing the restructuring plan of the BFA-Bankia group, particularly measures concerning hybrid capital and subordinated debt. The Court recognised that FROB was exercising statutory restructuring powers under Law 9/2012 and that the measures formed part of an approved restructuring process.

Principle: FROB possesses significant statutory powers to implement restructuring measures when those measures are connected with an approved restructuring plan.

2. Fundación Tatiana Pérez de Guzmán el Bueno and SFL v SRB, Case T-481/17

The EU General Court examined challenges to the Banco Popular resolution, including arguments concerning the right to be heard, property rights and the obligation to give reasons. The action was dismissed.

Principle: Resolution decisions may substantially affect shareholders, but they operate within the special EU banking-resolution framework and remain subject to judicial review.

3. Del Valle Ruíz and Others v Commission and SRB, Case T-510/17

The General Court examined the Banco Popular resolution with particular attention to the right to be heard, delegation of powers, property rights and the duty to state reasons. The action was dismissed.

Principle: The legality of resolution involves examining whether statutory procedural and substantive requirements were respected, rather than treating shareholders' ordinary corporate rights as overriding resolution legislation.

4. Eleveté Invest Group and Others v Commission and SRB, Case T-523/17

This case concerned the Banco Popular resolution and raised issues concerning the right to be heard, reasoning requirements, valuation and non-contractual liability. The General Court addressed the claims within the SRM framework.

Principle: Valuation, procedural safeguards and institutional reasoning are important elements of judicial scrutiny of banking resolution.

5. Algebris (UK) and Anchorage Capital Group v Commission, Case T-570/17

The General Court examined claims involving the Banco Popular resolution, including delegation, the duty to give reasons, good administration, the right to be heard and property rights.

Principle: Resolution authorities remain subject to administrative-law requirements even when acting under emergency financial-stability powers.

6. Aeris Invest v Commission and SRB, Case T-628/17; appeal C-535/22 P

The Banco Popular litigation also produced important questions concerning the conditions for resolution, the SRB’s duty of care, reasoning, confidentiality, the sale-of-business tool and shareholders’ property rights. The Court of Justice delivered its judgment in the appeal on 4 October 2024.

Principle: The exercise of resolution powers is subject to EU-law requirements concerning proportionality, reasoning, procedural obligations and protection of fundamental rights.

7. M.S.G. and Others v Banco Santander, Joined Cases C-775/22, C-779/22 and C-794/22

On 5 September 2024, the Court of Justice addressed questions referred by Spain’s Supreme Court concerning Banco Popular’s resolution, including bail-in, conversion and write-down of capital instruments, protection of shareholders and creditors, and claims based on allegedly defective prospectus information.

Principle: EU resolution rules can affect the availability and consequences of ordinary national-law claims following a resolution, particularly where instruments have been written down, converted or transferred.

Conclusion

Financial restructuring agencies in Spain operate within a multi-level national and European framework. FROB is the key Spanish executive resolution authority, while Banco de España performs preventive resolution functions and the SRB exercises central resolution responsibilities for institutions covered by the Single Resolution Mechanism.

The evolution from the crisis-era FROB restructuring model toward the modern Law 11/2015 and Banking Union framework has shifted the emphasis from government-funded rescues toward early intervention, resolution planning, bail-in, business sales, asset separation and protection of critical banking functions. The Bankia and Banco Popular litigation demonstrates that these powers can be extensive, but they remain subject to statutory safeguards, EU administrative-law principles and judicial review.