Bank of Spain Circular 6/2015, 17th November, on savings banks and bank foundations regarding certain aspects of remuneration and corporate governance reports filed by savings banks that do not issue securities admitted for trading on official securities markets and the obligations of bank foundations stemming from their holdings in credit institutions.

In line with Law 26/2013 concerning savings banks and bank foundations, the Bank of Spain issued this Circular last November, with the main objectives of:

• Adapting the formats of the mandatory annual corporate governance and remuneration reports to be filed by listed public companies, savings banks and other entities that issue securities for trading on official securities markets to make them more suitable for savings banks that do not issue securities admitted for trading on official securities markets;
• Determining the minimum content and obligations stemming from the management plan and the financial plan for bank foundations;
• Defining the minimum content that bank foundations must allocate to the reserve fund

The Circular is divided into two titles: Title I (Savings banks) and Title II (Bank foundations); and two Appendices: I (Annual corporate governance report) and II (Annual remuneration report).

We would highlight Title I, which establishes the obligation for savings banks that do not issue securities admitted for trading on official securities markets to submit a corporate governance report and a remuneration report to the Bank of Spain once a year.

The annual corporate governance report shall detail the structure of the bank’s corporate governance system and how it works in practise. The remunerations report with respect to directors and members of the control committee shall include a complete, clear, and understandable description of the bank’s remuneration policy adopted for the business year of reference, along with any policy that may be set for implementation in future years.

The contents of both reports are very similar to the contents of the corporate governance reports required of bank foundations in the  “Ministerial Order ECC/ 2575/2015,  determining the content, structure and publication requirements of the annual corporate governance report and establishing the accounting obligations of bank foundations”, whose draft we discussed in Progreso 4.

Reports must be in line with the completion instructions and forms included in Appendices I and II of this Circular:

• Appendix I: structure and functions of the governing bodies; remunerations received by the governing bodies; credit and guarantee or backing transactions; lending transactions with public institutions that have designated general directors, intragroup and related party transactions; conflicts of interest; group business structure; annual report drafted by the investments committee; risk control systems and other information of interest.

• Appendix II: Remunerations policy for the current year and expected policy for future years; overall summary of policy implementation during the year closing; detail of individual remunerations due to directors and other information of interest.

Savings banks must submit these reports to the Bank of Spain within the first four months of the year following the year reported on, with a maximum deadline set as the day the notice is published for the annual general meeting to adopt the annual accounts for the year referred to in the report.