Capital and funding
FROB’s funding mechanisms and budgetary allocation are defined in Article 53 of Law 11/2015 on recovery and resolution of credit institutions and investment firms.
In general, for financing the measures provided for in Law 11/2015, FROB will have the following funding mechanisms:
a) A «National Resolution Fund» without legal personality, managed by FROB and established as a separate asset, whose financial resources should amount to at least 1 percent of all entities’ covered deposits.
b) The possibility of borrowing from the funding mechanisms of other European Union Member States in accordance with the procedure laid down in the regulations.
FROB may only use the established funding mechanisms to the extent necessary to ensure effective implementation of the resolution instruments in order to meet the objectives, subject to the restrictions, provided for by regulation.
In particular, funding mechanisms may be implemented through one or more of the following measures:
a) Issuing of guarantees.
b) Granting of loans or credit lines.
c) Acquisition of assets or liabilities, maintaining their management or entrusting it to a third party.
d) Making contributions to a bridge institution or to the asset management company.
e) Payment of compensation to shareholders and creditors.
f) Making contributions to the entity when deciding to exclude certain liabilities from the bail-in.
g) Granting of loans to other funding mechanisms.
h) Recapitalisation of an entity under the terms and with the restrictions provided for in this Law.
The own funds of FROB may also be increased through the capitalisation of loans, credit lines or any other borrowing of FROB in which the Spanish central government is listed as creditor.
In order to fulfil its objectives, FROB may also make use of alternative means of financing, such as issuing fixed-income securities, receiving loans, arranging credit lines and carrying out any other borrowing whenever the ordinary contributions are not enough to cover the resolution costs and the extraordinary contributions are not immediately accessible or sufficient.
FROB was initially allocated own funds of EUR 9 billion in accordance with Royal Decree Law 9/2009. Of this sum, EUR 2.25 billion were provided by the deposit guarantee funds and EUR 6.75 billion were charged to the General State Budget. Royal Decree Law 2/2012, of 3 February, on the reorganisation of the financial sector subsequently added an extra EUR 6 billion charged to the General State Budget. Over the years, it has also obtained funding by issuing debt with a State guarantee (all redeemed) and a State loan in 2012 to execute the European assistance programme recapitalising Spanish credit institutions.
In order to restore FROB’s equity position, four partial conversions of the Treasury loan into contributions to FROB’s capital allocation took place. The first was carried out on 9 December 2013, for an amount of EUR 27.17 billion, the second on 30 June 2017 for an amount of EUR 3 billion, the third on 20 February 2020 for an amount of EUR 3 billion and the last on 20 December 2021 for an amount of EUR 5.6 billion under Article 53.4 of Law 11/2015.
From the funds received, 45.170 M€ was allocated to FROB’s equity
- 42.920 M€ Charged to public funds:
- i) contributions to the creation os FROB for 6.750 M€
- ii)Complementary contribution in 2012 for 6.000 M€
- iii) Partial conversions of the Treasury loan for 33.170 M€
- 2.250 M€ Contributed by DGF for the creation of FROB (share liquidated in 2012 due to the net worth position of FROB at year-end 2011).
FROB’s borrowing, however it is implemented, must not exceed the limit established for this purpose in the annual laws of the General State Budget. The current limit stands at 15.439 M€
Fee for the activities performed by FROB as resolution authority
In order to cover its operating expenses, FROB will charge entities a fee for FROB’s activities as resolution authority, which will be governed by the provisions of Law 11/2015 and, failing that, by Law 8/1989, of 13 April, on Public Fees and Prices and by Law 58/2003, of 17 December, on General Taxation.
Its most relevant characteristics for the purposes of its settlement and collection are as follows (sixteenth additional provision of Law 11/2015):
- Accrual. The fee is due on 1 January of each year, except for newly incorporated entities, where the fee is due on the date of incorporation.
- Tax base. The tax base will be the sum that each entity must contribute as an annual ordinary contribution to the National Resolution Fund or, as the case may be, to the Single Resolution Fund.
- Tax fee. The tax fee will be the result of applying a tax rate of 2.5 percent to the tax base.
- FROB will be responsible for the management, settlement and collection of the fee.
The income from the fee for the activities performed by FROB as the resolution authority has the status of FROB’s budgetary income.