lending or refinancing loans intended for the purchase of companies by their management or associated entities.

Funds obtained by the recipient insurance, reinsurance and pension companies must be used to ensure the smooth performance of their current business. Restrictions on remuneration and other benefits of the eligible institutions management, including share options, as well as restrictions on dividend payments and other shareholders rights may be imposed. The Government may convert any claim it has towards an eligible institution into a capital share in the eligible institution. 4. ACQUISITION OF RISK POSITIONS / IMPAIRED ASSETS

The Law on public finance provides for an asset protection scheme (APS). However, this law provides only a general outline of the APS. A Government decree laying down criteria and conditions governing the implementation of the APS, as required by the legislation, has not yet been adopted. Eligible institutions According to the Law on public finance, eligible institutions under the APS will be credit institutions with their corporate seat in Slovenia. Timing The APS is expected to operate until 31 December 2010. Conditions The implementing decree will define the terms of the applicable fee and in accordance with the Law on public finance that fee will respect EU requirements and guidelines. As with the other measures, and in accordance with the provisions of the Law on finance, the Government may, in its decree in relation to the purchase of claims, impose restrictions on the remuneration and other benefits of the companys management (including share options), on dividend payments and other shareholders rights as well as other restrictions on operations.

SPAIN
On 10 October 2008, the Spanish Government announced measures aimed at stabilising the financial markets through the provision of guarantees and liquidity to eligible financial institutions. 1. 1.1 STATE GUARANTEES State guarantee for new financing operations by credit institutions

The State guarantee for new financing operations by credit institutions came into effect on 14 October 2008202. The overall amount committed by the Government was EUR 100 billion in 2008. Information on the amount committed for 2009 is not yet available.
202

See Royal Decree-Law 7/2008 of 13 October 2008 on urgent financial and economic measures in relation to the concerted European action plan of the euro area countries (implemented by Ministerial Order
ECB Legal Working Paper Series No 8 July 2009

73

Eligible institutions Credit institutions with a registered address in Spain, including subsidiaries of foreign institutions that carry out significant activities in Spain, may apply for a guarantee under this scheme. In addition, to be eligible the institution must be solvent, have a minimum market share and have issued similar securities to the ones to be guaranteed within the last five years within the euro area. Eligible liabilities The new debt instruments that may be issued by eligible institutions are commercial papers, bonds and obligations admitted to trading on Spanish secondary official markets. Interbank deposits may not be guaranteed. Issue and maturity The guarantee scheme applies to financing operations conducted from 14 October 2008. The guarantee scheme is temporary and the guarantees are available until 31 December 2009. The issues guaranteed against the 2008 budget must have been issued prior to 15 December 2009. The scheme covers financial instruments with a maturity of between three months and three years, with the possibility of extension in exceptional circumstances to instruments with a maximum maturity of five years. Conditions To benefit from the guarantee, participating banks are required to pay a market-oriented fee, in line with the ECB Recommendation on Guarantees. 1.2 Individual guarantee measures

On 29 March 2009, the Spanish Government and the Banco de Espaa proceeded with the first major bank rescue in the current financial crisis, taking control of Caja Castilla-La Mancha (CCM). The Banco de Espaa pledged a loan to CCM backed by a Government guarantee to a maximum amount of EUR 9 billion203. The Banco de Espaa removed the savings banks directors and replaced them with central bank nominees204. The Spanish Government reported that CCM remained solvent but had liquidity problems. 2. RECAPITALISATION

In accordance with the stability measures205, the Government recapitalisation scheme (GRS), authorises the Minister for Economic Affairs and Finance to acquire instruments issued by resident credit institutions in order to strengthen their capital base. The details of this scheme will be set out in a Ministerial order. Eligible institutions Eligible institutions are resident credit institutions.
EHA/3364/2008 of 21 November 2008, amended by Ministerial Order EHA/3748/2008 of 23 December 2008). Article 1 of Royal Decree-Law 7/2008 authorises State guarantees of new financing operations by credit institutions. See also Commission Decision of 23 December 2008 in Case No NN 54b/08 Spain, Spanish guarantee scheme for credit institutions (OJ C 122, 30.5.2009, p.2). Pursuant to a guarantee authorised by Royal Decree-Law 4/2009 of 29 March 2009, confirmed by Parliament on 23 April 2009. Under the provisions of Law 26/1988 on discipline and intervention in credit institutions. Article 2 of Royal Decree-Law 7/2008 of 13 October 2008.

203

204 205

74

ECB Legal Working Paper Series No 8 July 2009

Eligible instruments The Government may acquire preference shares, ordinary shares and participation certificates. Timing The legislation provides for the scheme to operate from 14 October 2008 until 31 December 2009, but it has not yet been activated. Conditions Consultation with Banco de Espaa is a prerequisite for entering into an acquisition agreement. 3. ACQUISITION OF RISK POSITIONS / IMPAIRED ASSETS

The Financial Assets Acquisition Fund (Fondo para la Adquisicin de Activos Financieros (FAAF)) will acquire by way of auction high-quality assets backed by credit granted to individuals, corporations and non-financial institutions. This scheme came into effect on 15 October 2008206. The FAAF is administered and managed by the Ministry of Economic Affairs and Finance. It has an endowment of EUR 30 billion, which may be increased to EUR 50 billion. The FAAF is neither a bailout plan nor an impaired asset rescue programme; instead, it is aimed at alleviating the temporary liquidity shortage on the capital markets by providing medium-term credit (more than one year) to eligible institutions207. Eligible institutions Credit institutions domiciled in Spain and Spanish branches of foreign credit institutions may take part in the FAAF auctions. In particular, the FAAF is open to banks, savings banks, credit cooperatives and financial credit establishments. Institutions wishing to participate must declare their interest in advance through the procedure specified in the specific auction announcement. Eligible Assets The FAAF will invest in high-quality investment instruments issued by eligible institutions, backed by loans granted to individuals, companies and non-financial entities in Spain. It may purchase only AAA rated covered bonds, significantly limiting the credit risk, while providing liquidity for participating banks. In addition, there is a temporary repurchase measure under which the FAAF may purchase highly-rated covered bonds or asset backed securities from an eligible institution (with a minimum AA rating). The eligible institutions must commit to repurchasing those assets at a fixed price at a later date. In addition, the assets must be traded on regulated markets. Therefore, the assets that the FAAF acquires are subject to the strict regulation of the Spanish Securities and Exchange Commission (Comisin Nacional del Mercado de Valores) in relation to the issuance of assets traded on regulated markets.

206

207

See Royal Decree-Law 6/2008 of 10 October 2008, which sets up a Fund for the acquisition of financial assets. See also Commission Decision of 4 November 2008 in Case No NN 54a/08 Spain, Fund for the acquisition of financial assets in Spain (not yet published in the OJ). Detailed information on the four auctions that have taken place to date is available on the FAAFs website at www.fondoaaf.es/EN/Subastas.htm.
ECB Legal Working Paper Series No 8 July 2009

75