The Spanish Royal Decree (Law) - 38/2020, of December 29th 2020, published in the Spanish Official Gazette - Boletín Oficial del Estado (BOE) - which adopts measures to adapt to the status of a third State of the United Kingdom of Great Britain and Northern Ireland after the end of the transitional period provided for in the Agreement on withdrawal of the United Kingdom of Great Britain and Northern Ireland of the European Union and the European Atomic Energy Community, of January 31, 2020.
The above RDL 38/2020, which entered into force on 1 January 2021, establishes the necessary measures to adapt the Spanish legal regime once the transitional period ended. It includes a specific section dedicated to financial services, which is summarised as follows:
Continuity of contracts
The continuity of financial services contracts (banking, securities, insurance or other financial services) concluded by UK financial entities (mainly including investment firms, credit institutions and insurance companies) before 1 January 2021 will remain valid. The obligations of the parties under such contracts will remain applicable and enforceable.
From 1 January 2021, UK authorised entities will be subject to the relevant Spanish legislation and applicable regimes in respect of third country firms. UK entities will have to obtain a new authorisation to operate in Spain in the following cases:
- to renew existing contracts entered into before 1 January 2021;
- to amend existing contracts where changes imply provision of new services in Spain or that have an impact on the essential obligations of the parties;
- When the activities linked to the management of the contracts trigger licensing requirements;
- and to sign new contracts.
RDL 38/2020 expressly states that the activities derived of the management of the contracts entered into before 1 January 2021 that are not under the first three cases mentioned above shall not trigger new authorisation. In this regard, UK entities would need to verify carefully whether their business in Spain involves any of those cases in order to take appropriate measures to obtain the corresponding license to operate in this country.
Authorisation or registration initially granted by the relevant UK competent authority to UK entities shall temporarily maintain its validity until 30 June 2021 with the purpose of carrying out the activities needed to complete the termination or assignment of contracts entered into before 1 January 2021 to an entity duly licensed or passported to provide financial services in Spain and in accordance with the contractual provisions.
In Spain the FX supervisory authority is:
- the Banco de España (Bank of Spain) authorises and supervises entities providing banking services);
The Bank of Spain will have supervisory powers and may request UK entities to provide documentation and/or information or request certain steps to be taken, if needed.
If an entity fails to comply with the requirements imposed by the Bank of Spain, the temporary permission could cease to apply. In that event, the Bank of Spain as appropriate, will inform the UK entity that an activity which triggers a licensing requirement in Spain is being carried and, accordingly, Spanish penalties or sanctions may apply (which can lead to the imposition of very serious sanctions).
What happens next?
The Bank of Spain will adopt measures, as necessary, to ensure the legal certainty and safeguard the interests of financial services clients who could be affected by the withdrawal of the UK from the EU.
UK entities must ensure that:
- all provisions applicable in Spain are duly complied with and that indications imposed by Bank of Spain are properly followed and that
- provision of financial services is only carried out by entities duly authorised or passported in Spain, which must be included in the relevant registries of the Bank of Spain.