Banking Law and Financial Stability Proceedings in Spain

Introduction

Financial-stability proceedings in Spain form part of a broader European banking-union framework. The main objective is to deal with banks experiencing serious financial difficulty in a way that protects essential banking functions, depositors, the financial system and public funds.

The Spanish framework is based principally on Law 10/2014 on the regulation, supervision and solvency of credit institutions, Law 11/2015 on the recovery and resolution of credit institutions and investment firms, and the EU Bank Recovery and Resolution Directive (BRRD) and Single Resolution Mechanism (SRM) Regulation. Spain also has a macroprudential framework involving the Banco de España and the Autoridad Macroprudencial Consejo de Estabilidad Financiera (AMCESFI).

A financial-stability proceeding may therefore involve preventive supervision, recovery planning, resolution planning, early intervention, formal resolution, or ordinary insolvency depending on the condition and systemic importance of the institution.

Legal and Regulatory Framework

1. Law 10/2014

Law 10/2014 provides the principal Spanish framework for the regulation, supervision and solvency of credit institutions.

It supports supervisory measures concerning:

• capital;
• liquidity;
• governance;
• risk management;
• internal controls;
• supervisory review;
• prudential requirements; and
• financial stability.

The Banco de España identifies Law 10/2014, Royal Decree 84/2015 and Circular 2/2016 as central parts of Spain's financial-stability regulatory framework.

2. Law 11/2015

Law 11/2015 transposes the BRRD into Spanish law and establishes the national recovery and resolution framework.

The resolution framework is designed for circumstances where a bank is failing or likely to fail, there is no reasonable private-sector alternative capable of preventing failure, and resolution is necessary in the public interest, including to protect financial stability.

3. Single Resolution Mechanism

For banks covered by the Banking Union, resolution is primarily governed at EU level through the Single Resolution Mechanism (SRM).

The principal institutions include:

• the Single Resolution Board (SRB/JUR);
• the European Central Bank (ECB);
• the FROB in Spain;
• the Banco de España; and
• the Single Resolution Fund.

The Banco de España explains that preventive resolution functions for Spanish credit institutions are assigned to it, while executive resolution functions are assigned to the FROB. At Banking Union level, the SRB coordinates resolution decisions.

Financial Stability Proceedings

1. Preventive Stage

The first stage is conducted before an institution actually fails.

Resolution authorities prepare resolution plans identifying:

• possible resolution strategies;
• appropriate resolution tools;
• critical functions;
• obstacles to resolution;
• required loss-absorbing capacity; and
• MREL requirements.

The Banco de España describes resolution planning as an ongoing preventive process rather than something that begins only after a bank has failed.

2. Recovery Planning

Banks must prepare for situations involving serious financial deterioration.

Recovery measures can include:

• capital raising;
• disposal of assets;
• restructuring;
• changes to business operations;
• liquidity measures; and
• other actions intended to restore financial viability.

The objective is to allow the institution to recover without requiring resolution where possible.

3. Early Intervention

Where a bank's financial position deteriorates but resolution conditions have not yet been satisfied, supervisory authorities may take intervention measures.

The purpose is to prevent deterioration from becoming an irreversible crisis.

Possible supervisory concerns include:

• inadequate capital;
• liquidity stress;
• governance deficiencies;
• inadequate risk management;
• serious compliance failures; and
• deterioration of financial condition.

4. Determining Whether a Bank Is Failing or Likely to Fail

A crucial procedural step is determining whether the institution is failing or likely to fail (FOLF).

For significant institutions, the ECB normally makes this determination. The SRB can also make the determination under the applicable conditions. For less significant institutions, the relevant competent supervisory authority performs the assessment.

This assessment is different from simply declaring that a bank is insolvent under ordinary insolvency law.

5. Public-Interest Assessment

Even where a bank is failing or likely to fail, resolution does not automatically follow.

The resolution authority must consider whether resolution is necessary in the public interest.

Relevant considerations include:

• maintaining critical functions;
• avoiding serious financial-system disruption;
• protecting financial stability;
• protecting covered depositors;
• minimizing reliance on public funds; and
• avoiding unnecessary contagion.

If the public-interest requirement is not satisfied, ordinary insolvency may be used instead.

Resolution Tools

Spanish and EU law provide several major resolution tools.

Sale of Business

The failing institution, or relevant assets and liabilities, can be transferred to a purchaser.

Bridge Institution

Critical activities can be transferred to a temporary bridge bank while a longer-term solution is arranged.

Asset Separation

Certain assets can be transferred to an asset-management vehicle.

Bail-In

Certain liabilities and capital instruments can be written down or converted into equity so that losses are primarily absorbed by shareholders and eligible creditors rather than taxpayers.

The Banco de España identifies these tools as part of the Spanish/EU resolution framework.

Financial Stability and MREL

An important part of modern resolution law is Minimum Requirement for own funds and Eligible Liabilities (MREL).

MREL ensures that institutions maintain sufficient capital and eligible liabilities capable of absorbing losses and, where necessary, recapitalising the institution during resolution.

This is important because a resolution authority cannot effectively use bail-in if the bank has insufficient eligible liabilities.

The Banco de España specifically identifies MREL as a central component of resolution planning.

Judicial Proceedings and Financial Stability

A significant feature of Spanish banking law is the interaction between administrative resolution proceedings and judicial insolvency proceedings.

Ordinary insolvency proceedings involve courts, while resolution decisions involve specialized administrative authorities under the Banking Union framework.

The Banco de España's analysis notes that resolution authorities have considerable discretion when determining whether resolution is necessary in the public interest, whereas ordinary insolvency proceedings involve judicial assessment under insolvency law.

This distinction becomes particularly important when shareholders and creditors challenge resolution measures.

Important Case Laws

1. Fundación Tatiana Pérez de Guzmán el Bueno and SFL v SRB — T-481/17

This case concerned the 2017 resolution of Banco Popular Español.

The General Court initially examined challenges concerning the resolution scheme, including arguments concerning the right to be heard, property rights, reasoning requirements and the SRB's powers under the SRM Regulation.

The Court of Justice subsequently held in Commission v SRB, C-551/22 P that the direct action against the SRB resolution scheme itself was inadmissible because of the legal structure of the EU resolution process.

Importance: The case demonstrates the special procedural structure applicable to judicial challenges against bank-resolution decisions.

2. Del Valle Ruiz and Others v Commission and SRB — T-510/17

Investors challenged the Banco Popular resolution and the Commission's endorsement of the resolution scheme.

The General Court dismissed the action. The proceedings examined issues surrounding the resolution process, including valuation, property rights and the legality of the measures adopted in connection with Banco Popular.

Importance: The case illustrates how investor challenges interact with the objectives of maintaining financial stability during resolution.

3. García Fernández and Others v Commission and SRB — C-541/22 P

This appeal concerned Banco Popular and examined, among other matters:

• the objectives of resolution;
• the conditions for adopting a resolution scheme;
• valuations;
• confidentiality;
• access to the administrative file; and
• communications concerning the resolution.

The Court's judgment of 4 October 2024 addressed the obligations of the SRB and Commission within the resolution framework.

Importance: The case shows the tension between confidential crisis-management information and the procedural rights of affected parties.

4. ACMO and Others v SRB — T-330/20

This case concerned compensation following the Banco Popular resolution.

The applicants challenged the assessment concerning whether shareholders and creditors would have received better treatment under ordinary insolvency proceedings.

The General Court considered the independence of the valuer and the methodology used to determine the difference in treatment.

Importance: The case demonstrates the significance of the no-creditor-worse-off principle and valuation procedures in bank resolution.

5. Banco Santander — Resolution of Banco Popular III — C-687/23

In September 2025, the Court of Justice ruled on claims relating to instruments issued by Banco Popular before its resolution.

The Court distinguished between claims that had already accrued before resolution and claims that would arise only after resolution. It held that certain actions brought before resolution could remain enforceable against the successor institution, Banco Santander, depending on the circumstances.

Importance: The case clarifies how resolution affects pre-existing contractual and investor claims.

6. Aeris Invest v Commission and SRB — T-628/17

Aeris Invest challenged the Banco Popular resolution framework.

The General Court's 2022 judgment was part of a group of cases in which investors sought annulment of the resolution scheme or the Commission's endorsement. The Court dismissed the relevant actions.

Importance: The case demonstrates the extensive litigation generated by resolution measures and the difficulty of challenging crisis-resolution decisions where the legal conditions for resolution have been satisfied.

7. Algebris (UK) and Anchorage Capital Group v Commission and SRB — T-570/17

This was another Banco Popular-related proceeding concerning the legality of the resolution process.

The General Court considered challenges concerning the resolution scheme and its implementation and ultimately dismissed the relevant action.

Importance: It reinforces the importance of the statutory resolution framework, valuation procedures and the institutional allocation of powers between the SRB, Commission and national authorities.

Key Legal Principles Emerging from the Cases

1. Financial Stability Is a Statutory Objective

Resolution is not simply a mechanism for protecting one bank. Its purpose includes preventing serious consequences for the wider financial system.

2. Resolution Is Different from Ordinary Insolvency

A resolution authority may intervene where ordinary liquidation would threaten critical functions or financial stability.

3. Shareholders and Creditors Can Bear Losses

The resolution framework is designed to reduce reliance on taxpayer-funded rescues. The Banco de España describes bail-in and other resolution mechanisms as tools for transferring losses away from public funds where legally appropriate.

4. Valuation Is Central

Determining the value of the failing institution is essential because valuation influences:

• the choice of resolution strategy;
• the treatment of shareholders;
• creditor recoveries;
• bail-in requirements; and
• compensation claims.

5. Judicial Review Remains Available

Although resolution authorities have significant powers, affected parties can challenge legally reviewable decisions. The procedural route and the precise act being challenged are crucial, as demonstrated by the Banco Popular litigation.

Conclusion

Financial stability proceedings in Spain combine prudential supervision, recovery planning, early intervention, resolution planning, formal resolution and, where appropriate, ordinary insolvency.

The legal framework is built around Law 10/2014, Law 11/2015, EU banking-union legislation and macroprudential rules. The Banco de España has important preventive and supervisory responsibilities, while the FROB performs executive resolution functions and the SRB handles resolution within the Banking Union framework.

The Banco Popular litigation provides the most significant modern body of case law concerning Spanish bank-resolution proceedings. The cases demonstrate how courts address public interest, financial stability, valuation, investor rights, confidentiality, creditor treatment and the division of powers between European and Spanish authorities.

Ultimately, Spanish financial-stability proceedings seek to ensure that a failing bank can be dealt with in an orderly manner while preserving essential services, protecting covered depositors, limiting contagion and reducing the need for extraordinary public financial support.