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Spain

Incoporating the EU Second Banking Directive into Spanish national law, Law 3/1994 regulates the basic aspects of Financial Credit Establishments (Esteblacimientos Financieros de Crédito, or EFCs), which have been further developed by recently-approved regulations. As a result, certain Spanish credit institutions have until the end of the year to comply with the new requirements.

The EFC is a specific type of credit institution with its own characteristics. On the liabilities side, the EFC is barred from taking reimbursable funds from the public in the form of deposits, loans, temporary asset assignments or the like. The EFC is, however, allowed to obtain debt financing from its shareholders, group entities or financial institutions, as well as to issue securities with maturity greater than one month, and to effect the securitization of its assets.

An EFC can carry on activities generally performed by credit institutions, such as the lending, including consumer and mortgage loans, factoring and guarantees. The operative capacity of the EFC is therefore greater than that of the mortgage loan, finance and financial leasing companies (collectively referred to as Credit Institutions of Limited Scope), which the EFC is intended to replace.

An EFC may be incorporated as a Spanish limited company (Sociedad Anónima) with a minimum share capital of Pta850 million (US$6.6 million), and a Board of Directors made up of at least four members. Both its registered office and place of effective management must be in Spain, although the EFC can be controlled by non-Spanish persons. In addition, an EFC is not required to participate in Spain's deposit insurance scheme.

To continue their activities, existing Credit Institutions of Limited Scope must be converted into EFCs, or some other type of credit institution, before January 1 1997.

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