1. The Current Hierarchy in Spain – Law 11/2015 + BRRD Art 108

Under Article 108(1), BRRD creates a three-tier depositor preference in the hierarchy of claims in a winding up. It provides that covered deposits and claims by the Deposit Guarantee Scheme must have 'super-preference' relative to non-covered preferred deposits.

Spain implemented this as:

Under this regime maximum preferential treatment in the creditor hierarchy is granted to the deposits guaranteed by the Deposit Guarantee Scheme for Credit Institutions, and a general preference is afforded to the deposits of SMEs and natural persons.

And academic summary:

For banks, the 2015 Law that transposes the BRRD into the Spanish legal framework introduced a tiered depositor preference regime in which insured depositors rank higher than eligible deposits, but uninsured deposits still rank higher than other short-term liabilities.

Actual Ranking from Top (first paid) to Bottom (last) in Spanish Bank Insolvency/Resolution:

Tier 0 – Super-Preferred (Superprivilegio)

• Covered deposits up to €100,000 per depositor per bank – Art 108 BRRD
• Fondo de Garantía de Depósitos (FGD) subrogated claim after paying you
• This is super-senior to everything. Cannot be bailed-in.

Tier 1 – Preferred Deposits

• Eligible deposits of natural persons and SMEs above €100k – e.g., you have €150k, €100k is Tier 0, €50k is Tier 1
• Deposits of natural persons and SMEs that would be eligible if not booked in non-EU branch

Tier 2 – Ordinary Unsecured (Senior Preferred)

• Corporate deposits of large companies (non-SME) > €100k
• Senior unsecured bonds, supplier claims

Tier 3 – Non-Preferred Senior

• Senior non-preferred debt (MREL/TLAC instruments) – Law 11/2015 art 92 as amended by RD 11/2017 – can be bailed-in first

Tier 4 – Subordinated

• Tier 2 subordinated debt – then Additional Tier 1, then CET1 – tiered preferential treatment of subordinated claims, according to which subordinated debt holders rank higher than AT1 or AT2 holders

The introduction of bail-in radically changes fundamentals of unsecured creditors, but introduction of superseniority for retail deposits versus senior debt and corporate deposits provides them with enormous cushion against losses.

FGD: Funded by annual contributions of all Spanish banks, saving banks, credit unions, and branches of non-EU banks if deposits not covered elsewhere. Covers cash and securities separately.

2. The Reform Coming – CMDI / General Depositor Preference

EU Commission CMDI Proposal 2023 (to be transposed by 2025-2026) changes everything:

Amendment of the ranking of claims to provide for introduction of a general depositor preference in insolvency pursuant to which insolvency laws of Member States would be required to extend legal preference of claims in respect of deposits relative to ordinary unsecured claims to all deposits (covered and non-covered of households and SMEs and even all corporate deposits)

And:

Amendments to the BRRD, including amendment of ranking of claims to provide for general depositor preference, pursuant to which insolvency laws... would be required to extend legal preference... to all deposits.

Effect:

• Single-tier preference: All deposits rank pari passu above ordinary unsecured – removes super-preference of DGS. DGS still senior but not super-senior.
• Purpose: Allow DGS to fund resolution via least-cost test, not just payout. Easier to resolve mid-size banks without bail-in of depositors.

Spain: Draft transposition expected 2026. Banco de España published Q&A.

3. Case Laws – Where This Was Tested

A. Banco Popular Español – 7 June 2017 – The First EU Resolution

This is the defining Spanish case law.

• On 7 June 2017, SRB adopted resolution scheme, endorsed by Commission. FROB reduced Banco Popular's share capital to zero by means of write down of all outstanding shares. As a result...
• In case of Spanish Banco Popular, first credit institution to be resolved at European level in 2017, SRB concluded that in order to offset losses, it was first necessary to cancel shares and write down claims in amount of over EUR 4 billion. Only then could remaining assets be transferred to Banco Santander which paid symbolic price of one euro

Hierarchy applied:

1. CET1 shares = 0
2. AT1 (€1.35bn) = written down to 0
3. Tier 2 (€1.5bn) = converted then wiped
4. Subordinated and senior? No bail-in of senior or deposits.
5. Santander acquired with all deposits intact – proof of depositor preference.

Litigation – No Compensation (NCWO):

• Joined Cases T-302/20, T-303/20, T-307/20 – applicants were shareholders before resolution scheme
• General Court 2022-2024: Affected shareholders and creditors were not entitled to compensation from Single Resolution Fund, as they would not have received better treatment in liquidation than that resulting from resolution
• SRB Statement: General Court found shareholders and creditors affected by resolution were not entitled to compensation, confirming legality of Valuation 3 Decision – assessing whether they would have received better treatment had bank entered normal insolvency
• CJEU C-779/22, C-794/22 (BPE Preference International) – 2024-2025 appeals: In 2012 and 2014 capital instruments were converted into shares in Banco Popular – Court upheld bail-in order.

Principle: NCWO – No Creditor Worse Off than in insolvency. Because deposits had super-preference, shareholders would have got zero anyway in concurso, so no compensation.

B. Other Spanish Bank Resolutions:

• Banco Madrid (2015), Banco de Valencia, Catalunya Banc, Novagalicia: Applied same hierarchy – FGD paid covered deposits, DGS claim super-preferred.
• Abanca – Banca Cívica absorption: Depositors protected via FGD super-preference.

C. Spanish Supreme Court – Insolvency Ranking (Concurso):

STS 125/2019, STS 450/2020: Confirmed Law 11/2015 art 92 hierarchy prevails over general Ley Concursal 22/2003 for credit institutions. Deposits classified as créditos con privilegio general, not ordinarios.

4. Practical Example – You Have €250,000 in Spanish Bank That Fails

• €100k – Super-preferred – Paid by FGD within 7 working days (BRRD requirement), FGD then claims in estate as super-preferred creditor
• €50k (if you are natural person/SME) – Preferred – Paid after FGD but before corporate depositors – likely 90-100% recovery
• €100k if you are large corporate – Ordinary unsecured – may be bailed-in if resolution, or haircut in concurso
• If bank resolved via sale (like Popular), all €250k transferred to acquiring bank – you lose nothing because of preference.

Under future General Depositor Preference (CMDI), entire €250k would rank preferred if you are depositor of any type, above senior bonds – even better for depositors, worse for senior bondholders, but better for use of DGS funds.