Legislation

This translation is published for information purposes only while is intended to be faitful and accurate, the official binding text remains the Spanish version.

ROYAL DECREE 2606/1996, OF DECEMBER 20, ON CREDIT INSTITUTION DEPOSIT GUARANTEE FUNDS. (BOE OF DECEMBER 21)

(AS AMENDED BY ROYAL DECREE 628/2010, OF MAY 14 (BOE OF JUNE 31) AND ROYAL DECREE LAW 16/2011, OF 14 OCTOBER (BDE OF OCTOBER 15))

The object of this Royal Decree is to establish the legal regime covering Deposit Guarantee Funds for Banking Institutions, Savings Banks, and Credit Cooperative Banks.

The new regulation implements European Parliament and Council of Europe Directive 94/19/CE, 30th May, concerning deposit guarantee systems, already partially implemented via Royal Decree-Law 12/1995, 28th December, on urgent budgetary, taxation and financial measures, which introduced the first important novelties such as obligatory membership of a Deposit Guarantee Fund for Spanish credit institutions, the conditions for exemption from this duty, together with the reasons for expulsion.

A further new feature introduced by the above mentioned Royal Decree-Law was the definition of the system of contributions to the Funds and the mechanisms for the reduction and suspension of contributions, such that each of the Funds is fed via the annual contributions of its member credit institutions and, exceptionally, by contributions from the Banco de España, the amount of which must be set by Law.

At the same time the range of circumstances giving rise to compensation payments was broadened to include administrative declaration of non-payment of deposits along with temporary receivership and bankruptcy. Finally, the regulations governing the membership of branch offices of foreign credit institutions were outlined.

This Royal Decree, which completes the transposition of Directive 94/19/CE into Spanish law, develops the previous one further, one of its most outstanding features being that it brings together in a single unified text the regulations governing the various different Funds, formerly dispersed in a variety of legal instruments.

In Spain, Deposit Guarantee Funds have traditionally been characterized by the double purpose of insuring deposits and reorganizing and refloating financial institutions which are in difficulties. The current regulations have maintained both principles.

The most novel features of the current regulations centre on the following points:

Firstly, voting is required as the means of electing members of the bodies governing the Funds, i.e. this is to be the means whereby associations representing credit institutions elect their representatives on the respective Deposit Guarantee Fund’s Management Committee. The concept of the representatives of the associations is established according to two criteria: They must represent more than 80 per cent of the member institutions of the corresponding Fund and more than 90 per cent of the deposits held by these institutions. If these percentages are not reached the appointment of representatives shall be carried out by means of a direct vote held by all the member institutions of the Fund.

Secondly, several points should be highlighted. The definition of the guaranteed deposits involves a delimitation which is as much positive as negative, in accordance with the guidelines foreseen in the Directive that it implements. Deposits not guaranteed on account of their nature and which, therefore, are not included in the calculation of the contributions, are distinguished from those which, although covered in principle, and so included in the calculation, may be excluded from the obligation to pay under certain circumstances.

On the other hand, the maximum guaranteed amount in relation to deposits is limited to the equivalent in pesetas of 20,000 Euros, although up until 31st December 1999 this limit remains set at 15,000 Euros.

This has given rise to the adoption of the so-called “principle of guarantee by the country of origin” which implies obligatory coverage by Deposit Guarantee Funds in the country of origin in the case of Spanish branch offices of credit institutions based in other countries of the European Union. Nevertheless, a limitation known as the “prohibition clause on the export of more favourable regimes“, is included, which prevents the level and the scope of the coverage exceeding the maximum offered by the guarantee system of the Member State of in which the foreign institution operates.

The system of membership of the Banking Institution Deposit Guarantee Fund for foreign branch offices of credit institutions is also defined, and an essential distinction is drawn. Institutions based in other Member States of the European Community are permitted voluntary membership so that they may offer their depositors a complementary guarantee in addition to their own.

On the other hand, the obligatory nature of the regime covering branch offices of credit institutions based in countries outside the European Community varies depending on the existence or not of coverage in the country of origin, and whether there is any difference in its level or scope.

Thirdly, the regulation of procedural aspects relating to the causes or circumstances that give rise to the liability for payment and those governing payment itself stand out.

The second traditional purpose of Spanish Deposits Guarantee Funds has been to ensure the stability of the financial system, avoiding a crisis afflicting one credit institution affecting the rest of the institutions operating in the market. Another noteworthy feature of the new regulations is the so-called “Action Plan”, which may include both preventive measures and measures for the reorganization of the institution. These measures may entail a range of actions intended to restructure the institution’s assets, in particular subscription of capital increases by the Fund, and various types of financial assistance and management measures.

The Royal Decree delimits the functions of the Banco de España and of the Management Committees of the Funds in relation to the approval of the action plan, and in relation to the adoption of executive measures and specific steps for reorganization. This regulation seeks to avoid overlapping competencies and to systematize the public or private actions intended to overcome financial crises affecting credit institutions.

In virtue of which, on the proposal of the Second Vice-President of the Government and Minister of Economy and the Exchequer, according to the Council of State and prior deliberation of the Board of Ministers at their meeting of the December 20, 1996,

D E C R E E D

Article 1. Object and legal personality.

Article 2. Fund government.

1.

If at the time of electing representatives for the management committees of the respective Deposit Guarantee Funds The Credit Institutions which are members of one of the mentioned associations represent more of the 80 per cent of members of the corresponding Fund, and the deposits of member institutions account for more than 90 per cent of those constituted, the representative associations shall be responsible for proposing appointments of representatives to the Minister of the Treasury. The Banco de España shall verify compliance with the percentages of representation mentioned above and, in the event of compliance, the association in question shall be notified. If the required percentages are not reached, representatives shall be put forward by the member institutions of the Fund and shall be appointed by direct election by all members. Every institution shall have as many votes as the value of its deposits expressed in millions of pesetas, and only persons holding 20 per cent or more of the votes may be appointed. The Banco de España shall organize and set the voting criteria. For the purposes of this article, all debits that may benefit from the guarantee provided by the funds, pursuant to current regulations, regardless of the amount owned by each holder, shall be considered deposits.

2. The management committees shall meet when called by their Chairman, whether on his own initiative or as a result of an application by any of the members of the committee. The management committees shall also be empowered to establish their own system for the calling of meetings.

3. The management committees shall determine the rules for their own operation and shall be able to agree on the delegations that they deem appropriate for the due exercise of their functions.

4. Each management committee shall have, besides the functions that are considered elsewhere in this Royal Decree, the following duties and functions:

a) To inform and advise the Banco de España on matters which are under the competency of the Funds.

b) Approval of the accounts that the Funds must provide to their members and to the Banco de España each year.

5. The management committees shall demand from the Banco de España as much information they need regarding their member institutions for the performance of their functions. In particular, they shall be informed by the Banco de España regarding those institutions in economic difficulties that may require action on the part of their respective Fund.

6.

7. The members of the management committee shall be obliged to keep secret all information they may come to know as a result of their participation in the tasks of the Fund, and they may not make use of such information for purposes other than those relating to the exercise of their office on the committee. For these purposes, the provisions of article 6 of Royal Legislative Decree 1298/1986, 28th June, on the adaptation of current law governing credit institutions to European Community directives, shall be applicable in the form given to it by article 5 of Law 3/1994, 14th April, whereby the second Banking Coordination Directive and other modifications to the financial system were incorporated into Spanish legislation.

Article 3. Assets of the Funds

1. Member institutions of the Funds are obliged to comply with the economic regime governing annual contributions and extraordinary contributions laid down in subsections 2 and 5 of this article, such that the relevant Deposit Guarantee Fund can meet its obligations to depositors and investors imposed upon it by this regulation.

2. Annual contributions by member institutions of the Funds shall be 2 per 1000 of the deposits held as at the end of the financial year for which the guarantee is give. To this end, the basis for the calculation will be integrated with the deposits insured by the system in accordance with the definition in article 4.1, plus 5 per 100 of the quoted value of the stock covered by the system, as defined in article 4.2, on the last day of trading of the year in the relevant secondary market. When these stocks include securities or other financial instruments that are not traded on a secondary market in Spain or elsewhere, the basis for calculations will be given by their nominal value or by their reimbursement value, whichever is more appropriate for the type of security or financial instrument in question, unless another more significant value has been declared or is given for the purposes of deposit or registration.

3. The annual contributions of the member institutions will be used to cover the needs arising as a result of the funds' exercising their function and will be paid into the account designated by the corresponding Management Committee, following the close of each financial year within the periods set by the relevant Management Committee and shall comprise one or more payments of an amount according to the needs of the Fund.

4. When the assets of a Fund reach a sufficient amount for it to be able to fulfil its functions, the Minister of the Economy, upon the proposal of the Banco de España, may agree to a decrease in the contributions mentioned in point 1 of this article. In any case, such contributions shall be suspended when the assets not committed to any of the operations proper to the purposes of the Fund are equal to or greater than 1 per cent on the base of calculation of contributions foreseen at the precedent section 1, this fact being communicated by the Management Committee in the form determined by it.

However, without prejudice to the next section, any annual surplus and any surplus in the equity of the DGS over the amount necessary for the fulfillment of its purposes, will remain in that equity and cannot be given back to the adhered entities.

5. When the value of the Funds becomes negative, the Management Committee may agree to extraordinary contributions being made by the member institutions. The amount due from each institution shall be calculated in accordance with the basis for the calculation of contributions envisaged in subsection 1 above, and their total amount may not exceed the sum necessary to eliminate the deficit.

6. Exceptionally, for the purpose of safeguarding the stability of member institutions as a whole, a Fund may draw upon contributions from the Banco de España, the value of which shall be set by Law.

7. The uncommitted assets of the Funds must take the form of national debt or other highly-liquid, low-risk assets.

Article 4. Definition of the guarantee.

1. For the purposes of this Royal Decree, credit balances on account, including those funds arising transitorily as a result of movements of funds and nominative deposits that the institution is obliged to restore under the applicable legal and contractual conditions shall be considered guaranteed deposits, whatever the currency in which they are denominated, provided that they are constituted in Spain or in another Member State of the European Union.

Among the Funds arising out of transitory situations, referred to in the preceding paragraph, shall include monies entrusted to the institution in order for it to provide investment services, pursuant to Law 24/1988, or monies which derive from the providing of such services or activities.

2. For the purposes of this Royal Decree, tradable securities and financial instruments envisaged in article 2 of the Law on the Securities Market that have been entrusted to the credit institution in Spain or elsewhere for deposit or registration or for the providing of any other investment service will be deemed to be guaranteed securities. Securities covered by the guarantee system shall include, at all events, those that have been temporarily transferred and which remain registered or entered in the books of the transferring institution.

Securities or financial instruments entrusted to the credit institution for the provision of investment services and complementary activities in territories defined as tax havens by current legislation or in a country or territory which lacks a stock market supervisory body or when, although such a body exists, it refuses to exchange information with the Spanish Stock Exchange Commission, shall not be covered by the guarantee system.

The Ministry of the Economy following proposal by the Spanish Stock Exchange Commission will list the countries or territories falling into the aforementioned category.

Securities and other financial instruments entrusted to the branches of Spanish credit institutions in non-community countries that have their own investment protection schemes similar to that operating in Spain shall not be covered.

3. As regards the guarantee referred to in the preceding subsections covering investment services or securities depositing or registration activities, the Funds shall cover the failure to return the securities or other financial instruments belonging to investors who are adversely affected as a result of the situations envisaged in article 8.2 of this Royal Decree. In this case, under no circumstances will the loss of value of the investment or any credit risk be covered.

4. The following shall not be considered to be guaranteed deposits for the purposes of this Royal Decree, and shall not therefore be included in the calculation of contributions:

a) Deposits made by other financial institutions on their own behalf and in their own name and those made by any of the following:

1st. Stock market companies and agencies.

2nd. Insurance companies.

3rd. Security investment companies.

4th. Collective investment companies, pension fund management companies, and companies dealing in security funds, venture capital and deposits for the institutions they manage.

5th. Portfolio management companies.

6th. Venture capital companies, and theirs Management Committee.

7th. Institutions whose main activity is the ownership of share or holdings.

8th. All institutions, regardless of their denomination or purpose, which, according to the applicable regulations, carry out business typical of the companies listed above.

9th. Any financial institution submitted to prudential supervision.

b) Securities representing debt issued by the credit institution, including promissory notes and negotiable securities.

c) The bearer deposit certificates, temporary assignment of assets and financing with a subordination clause.

d) Deposits constituted by companies belonging to the same financial group as the credit institution in which the deposits are placed.

e) Deposits constituted by Public Administrations.

f) The deposits constituted by those who hold administrative or management offices in the institution giving rise to the need for action by the Fund, pursuant to article 1.4 of Law 26/1988, 29th July, on Credit Institution Discipline and Intervention, and their managers that have general faculties of representation or by persons holding a significant share of the assets of the institution, pursuant to article 56 of Law 26/1988, or who have a shareholding in companies of the financial group, according to the criteria given in article 4 of Law 24/1988, 28th July, on the Stock Market, the auditor responsible for the audit reports and those depositors with the characteristics mentioned previously in the companies belonging to the group of companies to which the credit institution belongs and their spouses and close relatives.

For the purposes of this Royal Decree those securities held by persons mentioned in paragraphs a), d), e) and f) above shall not be deemed to be covered by the guarantee system.

5. Also, notwithstanding the fact that they are taken into account for the calculation of contributions, the duty to pay guaranteed amounts shall not be applicable if the sums were deposited under any of the following circumstances:

a) In breach of current legislation, in particular those funds arising out of operations in relation to which there has been a criminal sentence for offences involving money-laundering transactions.

b) For customers who have brought about, through their own actions, financial conditions that have contributed towards worsening the situation of the institution, provided such circumstance have been confirmed by a court conviction.

c) Persons acting on behalf of any depositors excluded under the foregoing or under this subsection, or those acting in concert with those persons mentioned in paragraphs a) and b) above.

6. Notwithstanding the periods and deadlines laid down in article 9.1. of this Royal Decree, when in the opinion of the Management Committee there exist circumstances allowing it to suspect a depositor’s relationship to, or participation in, the circumstances bringing about the situation giving rise to the duty to paying indemnity, it shall be permitted to suspended payment of the corresponding compensation until the Court declares such a relationship or participation not to exist. The Funds shall have a similar power when a depositor or any other person with a right or interest in a deposit has been prosecuted or summary court proceedings have been begun against him for offences relating to money-laundering transactions, pursuant to Title III of Book IV of the Law of Criminal Judgment and until such time as proceedings are concluded.

The provisions of this and the preceding subsection shall also be applicable to the holders of securities covered by the guarantee.

Article 5. Adscription to the Funds

1. Credit institutions entered in the Special Registers of the Banco de España corresponding to Banks, Savings Banks, and Credit Cooperative Banks, must join their respective Guarantee Funds.

2. The foreign branch offices of credit institutions based abroad shall be governed by the following regime.

a) The branch offices of credit institutions authorized in other Member States of the European Union may join the Deposit Guarantee Fund for Banking Institutions.

b) The branch offices of credit institutions authorized in a country which is not a member of the European Union shall be governed by the following regime:

1st. Membership of the Guarantee Fund of Deposits in Banking Institutions shall be obligatory when the guaranteed deposits or securities constituted or entrusted to the branch are not covered by a deposit guarantee scheme in the country of origin.

2nd. Such branches must subscribe to the Banking Institution Deposit Guarantee Fund in order to cover the difference in level or scope, when the guarantee given under the system in the country of origin is less than that given in Spain, either regarding the deposits, already regarding the securities guaranteed.

3rd. Membership of the Banking Institution Deposit Guarantee Fund shall not be obligatory when deposits and the stock guaranteed are covered in the country of origin.

For the purposes of determining the circumstances corresponding to each branch office, these shall accredit, if appropriate, the coverage given by the Guarantee System of their country of origin.

The DGS shall cooperate with the deposit insurance systems of other countries in order to organize, where appropriate, payment of amounts guaranteed. To this end, they can grant agreements and collaboration mechanisms they deem appropriate.

3. The Management Committee of each Fund shall publish annually a list of its member institutions in the “Official State Gazette”.

4. The adhered entities must make available to their depositors and investors and potential in all its offices and on its website in an easily understandable and accessible, the information needed to identify the Deposit Guarantee Fund to which they belong. Such information shall include its name, location, phone number, website address and e-mail, and the provisions applicable to it, specifying the amount and the coverage offered.

The deposits or securities not guaranteed under the provisions of Article 4.4, shall be report thereon to their depositors and investors.

If the depositor or investor will be informed upon request also the conditions necessary to produce the payment of guaranteed amount and the necessary formalities for payment.

They will also be publicly available information on background characteristics and indication, if any, of the coverage offered by systems or foreign DGSs. In particular, the rules require coverage for deposit or registration of securities to other financial institutions.

Subject to the provisions of the preceding paragraphs of this paragraph, adhered entities may not use this circumstances in their advertising, but may include a mention of it without adding additional data or information on the DGSs.

5. Any institutions that for any reason cease to be members of their respective Funds shall not be entitled o a refund of the sums they have contributed.

Article 6. Rejection from the Funds

1. Credit institutions not making their contributions to the Deposit Guarantee Fund to which they belong in the due manner, don't contribute to you spill them or which do not comply with their obligations pursuant to section 4 of the foregoing article, may be excluded from the Fund if, having been required to make good the breach, they have not rectified their situation within a stipulated period, which may not be less than one month. Competence to decide the expulsion of an institution shall reside with the Minister of the Economy, who shall act upon the proposal of the Banco de España, following a report from the management committee of the Fund affected and after holding audience with the interested party, pursuant to article 84 the Law 30/1992, 26th November, on the Legal Regime of the Public Administrations and of Common Administrative Proceedings.

2. When the branch office of a financial institution based in a country of the Union European does not fulfil its duties as a member of the Fund, the Fund may, through the Banco de España, communicate this fact to the supervisor authority in the State of origin of the institution, such that it may take the appropriate measures. If, despite this, the institution persists in its failure to fulfil its obligations, the Fund shall be able to propose to this authority the expulsion of the branch office. Once the express permission of the mentioned authority has been obtained, the Fund shall notify the branch office of its expulsion, which shall be effective twelve months after receipt of notice.

3. The deposits made, both with Spanish financial institutions and branch offices of foreign credit institutions, prior to the expulsion becoming effective, shall continue be protected by the Fund until expiry. In the case of current accounts, the protected balance shall not exceed that existing on the date of exclusion, minus the debits taking place between this date and that of the circumstances giving rise to the payment of compensation.

Securities and other financial instruments entrusted to the institution prior to their exclusion coming into effect shall cease to be covered by the Fund after three months have elapsed since the date of their exclusion.

The withdrawal of the coverage shall be communicated to depositors through the “Official State Gazette” and two national circulation newspapers.

Article 7. Extent of the guaranteed amount

1. The guaranteed amount of deposits will limit the amount of 100,000 euros or, in the case of deposits denominated in another currency, its equivalent using the exchange rates of day to occur any of the acts listed in Article 8.1 of this Royal Decree or the day before when it was a working holiday.

The amount guaranteed to the investors who have entrusted to the credit securities or financial instruments will be independent of the guarantee of the preceding paragraph and reach a maximum amount of 100,000 euros.

The amount shall be calculated at the market value of said securities or other financial instruments on the day on which any of the events listed in article 8.2 of this Royal Decree arise, or on the previous day in the case of a non-business day. The amounts covered by the guarantee shall be paid in their monetary equivalent.

If the securities or other financial instruments are not traded on an official secondary market in Spain or elsewhere, their value will be calculated in accordance with the following principles in order to determine the covered amount, and solely for this process, once any of the events envisaged in article 8 arises.

a) Equities: theoretical value calculated on the basis of the last audited balance sheet of the issuer. If there is no audited balance or it is subject to reservations with adjustments that may result in a theoretical value less than that resulting from the accounts, the market value shall be determined by an expert valuation.

b) Fixed-interest securities: the nominal value plus the accrued coupon, when the interest rate is explicit, or the reimbursement value discounted at the implicit issue rate, in the case of zero-coupon securities or securities issued at a discount.

c) Financial instruments: estimated market value calculated according to generally accepted valuation procedures with regard to the instrument in question.

d) In the cases of securities or financial instruments issued by companies that are either declared bankrupt or have filed for bankruptcy protection, the value repayable shall be determined by an expert valuation. Determination of this value may be postponed until the relevant debt rescheduling or bankruptcy proceedings are complete.

This cover shall be applied per depositor or investor, whether a legal or physical person, and whatever the number and type of deposits of cash, securities or financial instruments which that person holds at the institution in question. This limit shall also apply to depositors or investors who hold deposits, securities or financial instruments of a value greater than the maximum amount covered.

2. When an account has more than one holder, the balance shall be divided among the holders, according to the provisions of the deposit contract and, failing that, in equal shares.

3. When the holders of a deposit act as representatives or agents of third parties, provided this situation existed at the moment of formalising to the institution involved in the circumstances described in article 8, the fund liability shall be applied to the third party payees of the deposit to the extent that it corresponds to them.

4. The provisions of subsections 2 and 3 above shall also be applicable to the holders of securities and instruments covered by the scheme.

5. Deposits existing at the moment of revoking the authorization granted to an institution which is member of a Fund shall continue to be covered up until the time the institution ceases to exist and the institution shall be obliged to meet any contributions required of it by Law. In the case of current accounts, the protected balance shall be that existing on the date of the revocation. Securities or financial instruments entrusted to the institution at the time of revocation will cease to be covered by the Fund after three months have elapsed from this time.

Article 8. Reasons for performance of the guarantee

1) The DGSs shall indemnify the guaranteed amount of deposits under the following circumstances:

a) A court order has been issued declaring the contest a credit institution.

b) Banco of España declares that the credit institution cannot, in the light of the facts from which it is aware the Banco of España and for reasons directly related to their financial situation, fulfill its obligations to investors.

2) The DGSs shall indemnify their holders the guaranteed amount of the securities and financial instruments subject to coverage under the following circumstances:

a) A court order has been issued declaring the contest a credit institution and this situation results in suspension of the repayment of the securities or financial instruments, however, not carry out the payment of these amounts if, within the time limit for start disbursement, the lifting of the suspension referred.

b) Banco of España declares that the credit institution cannot, in the light of the facts from which it is aware the Banco of España and for reasons directly related to their financial situation, fulfill its obligations to investors.

Banco of España can make this declaration if occur the following circumstances:

a) The investor has asked the credit institution the reimbursement of the securities and financial instruments that would have trusted and had not received satisfaction within a maximum of twenty working days from the entity.

b) The credit institution is not in the situation referred to in paragraph a) of paragraph 1 of this article.

c) To be given after hearing the credit institution.

3. When the entity concerned was a branch of a credit institution with headquarters in another EU state, the declaration of default shall be made with the cooperation of the competent authority of that State.

Article 9. Payment and its effects.

1. Without prejudice to paragraph 4 of Article 4 of this Royal Decree:

a) The DGSs shall comply with the duly verified claims within twenty days after the date on which the Banco of España took the decision referred to in paragraph b) of paragraph 1 of the preceding article or the judicial authority issued the decision referred to in paragraph a) of paragraph 1.

The collection and transmission of credit institutions of accurate information on depositors and the deposit guarantee, necessary to verify the claims must be made within the period specified in the preceding paragraph.

When DGSs providing that cannot make payments on time, they may ask the Banco of España to grant an extension not exceeding ten working days, indicating the reasons for the request. Banco of España may authorize when you appreciate who attend exceptional reasons which justify the delay, such as the large number of depositors, the existence of accounts in other countries, or the finding of extraordinary technical or legal difficulties, to check the actual balance of deposits guaranteed or whether or not to pay the amount guaranteed.

b) In addition, DGSs must satisfy the claims of the investors as soon as possible and not later than three months after having determined the position of the investor and the amount.

When DGSs cannot make payments on time, they may ask the Banco of España to grant an extension not exceeding three months, giving the reasons for the request. Banco of España may authorize when you appreciate who attend exceptional reasons which justify the delay, such as the high number of investors, the existence of securities entrusted to the institution in other countries or a finding of extraordinary difficulties, technical or legal, to check actual balance of securities or whether or not to pay the amount guaranteed.

2. The payment of guarantee amounts of the deposits and securities or instruments shall not be extended to those made subsequent to the date on which the causes stated in the previous article occurred nor to deposits, investments or amounts that have been withdrawn subsequent to this date, notwithstanding the provisions of article 7.1 of this Royal Decree.

3. The DGS may not have resort to the periods referred to in previous sections to refuse the benefit of a guarantee to a depositor who has not been able to exercise his right in time. Amounts not satisfied within the prescribed period or its extension will remain in the DGSs available to its holders, notwithstanding its prescription under law. However, if the claims to be made by the depositors or investors in enforcement of the guarantee shall be made after the satisfaction to them in any amount that was agreed in an eventual bankruptcy proceeding, the determination of the amount to be paid under security must take into account the amount already received in that proceeding, in order that those depositors or investors do not derive economic benefit or suffer detriment in relation to those who executed the guarantee in an earlier time.

4. By the mere fact of making payment of the guaranteed amounts the legal rights of depositors shall be surrogated to the Fund to the extent of the payments made, the document in which the payment is recorded being sufficient to accredit this right.

5. In the event that the securities or other financial instruments entrusted to the institution were restored by it subsequent to the payment of a sum under the investment guarantee system, the funds may seek reimbursement for the amount paid, in whole or in part, if that amount, valued in accordance with article 7.1. at the time of the payment to the investor, is greater than the difference between the value of the securities entrusted to the institution, valued at the time the events listed in article 8.2. occurred, and the amount paid to the investor. When the value of the amount returned was greater than that of the securities or instruments, calculated on the date stated in article 8.2., the excess shall be divided between the Fund and the investor on a pro rata basis according to their respective credit.

Repayment shall be made to the corresponding Fund, which shall hand over to the investor the sums due in accordance with the provisions of the preceding paragraph. Said Fund shall be empowered, for this purpose, to sell the securities for the sum that is applicable.

Article 10. Other actions of Deposit Guarantee Funds.

1. Exceptionally, when according to the information supplied by the Banco de España, the situation of a credit institution is such that it may be foreseen that the Fund shall be obliged to make payment, pursuant to article 8 of this Royal Decree, the Fund shall be able to carry out preventive measures and reorganization of the institution concerned with a view to improve its viability and enabling it to overcome its crisis, within the framework of an action play agreed by the institution and approved by the Banco de España.

2. All plans of action including measures that require the approval of the Board or General Shareholders’ Meeting of the institution concerned, shall be deemed to be conditional and shall not be carried out without the decisions that make them possible. Meanwhile, if the institution’s situation so requires, The Deposit Insurance Funds may provide temporary assistance, provided that in the opinion of the Management Committee this is appropriately guaranteed.

3. When adopting these measures the Fund shall take into account their economic cost, which it shall compare with the payments it would have had to have made if, at the time of adopting the plan, it had instead decided to pay the amounts guaranteed foreseen in the article 7.

Article 11. Preventive measures and measures for reorganization included in action plans.

1. The action plan of the institution in crisis, provided it has the support of a Deposit Guarantee Fund, may include the following actions:

a) Financial aid, which may consist of subsidies, granting of guarantees, loans under favourable conditions, subordinate financing, acquisition for the fund of damaged or unprofitable assets that appear on the institution’s balance sheet, together with any other types of financial support.

b) Restructuring of the institution’s assets, which may entail, among other measures, the appropriate application of the institution’s own resources in order to absorb its losses, in the light of the particular circumstances of each case; facilitating a process of merger with, or take-over by, another institution of recognised solvency or the transfer of its business to another credit institution; subscription of capital increases by the Banking Institution Fund, in accordance with the provisions of the following sections; and adoption by the relevant bodies of the institution concerned of all such resolutions as guarantee the appropriate application of the support given by the relevant Deposit Guarantee Fund.

c) Management measures that improve the organization, procedural systems and internal control of the institution.

2. Measures intended to reorganize and refloat the institution must be channeled so as to ensure the viability of the institution within a reasonable period, in the opinion of the Deposit Guarantee Fund, either by reinforcing its assets and solvency, or by facilitating its merger with or absorption by another institution of recognised solvency, or by the transfer of its business to another credit institution.

3. The Banking Institutions Deposit Guarantee Fund may subscribe capital increases that the banks approve as part of an action plan pursuant to the foregoing article, in order to re-establish their asset situation if such capital increases are not covered by the institution’s shareholders.

The capital increases referred to in the foregoing paragraph shall be deemed not to be covered by the institution’s shareholders when the General Meeting of Shareholders has resolved upon the total or partial exclusion of the right of preferential subscription, pursuant to the applicable legislation.

The Fund shall offer for sale the shares so subscribed during such capital increases as described in the previous subsection within a maximum period of one year. This offer for sale shall be undertaken in such a way as to ensure that at least those credit institutions which are members of the Fund and whose financial capacity, business and other prerequisites, are able to ensure the definite reestablishment of solvency and normal operation of the bank undergoing reorganization given its relative size and importance. The offer shall state the minimum commitments that must be undertaken by the successful bidder.

The Fund shall award the shares to the institution that offers the most advantageous purchase conditions. For this purpose the capacity and financial and organization at means of each bidding institution may be taken into account as well as the economic conditions of the offer.

The offer for sale of the shares and the conditions of sale, as well as the decision as to who to award them, shall be published in the “Official State Gazette”.

4. The Savings Banks Deposit Guarantee Fund may subscribe issues of participative shares approved by the institutions as part of an action plan in accordance with the terms of the foregoing article, in order to re-establish the situation of its assets should they not be covered during the subscription period.

5. In order to make it possible to award the shares, or participative shares envisaged in sections 3 and 4 above, as well as to make it possible to improve the circumstances of temporary receivership admitted by the judicial authority, the Fund shall be able to assume losses, to give guarantees and to purchase assets that appear on the balance sheet of the affected institutions, as well as to be take responsibility for the economic balance resulting from proceedings of various types that are in progress or may be initiated subsequently. The Fund may also purchase assets of those institutions when, in the opinion of the management committee, this contributes substantially to avoiding the need for other measures to reestablishment the asset situation of an institution which is a member of the Fund. This action shall not exclude the requirement upon the administrators of the institution to adopt other measures contributing to the strengthening and to the solvency of the institution, and to the necessary balancing of the profit and loss accounts of the credit institution in question.

6. Under no circumstances shall the statutory limitations on voting rights with respect to shares purchased by the Banking Institutions Deposit Guarantee Fund within the framework of action plans envisaged in this Royal Decree be applicable to the Fund.