New Decree-Law on Bank Restructuring and Bolstering of Lending Institution Capital Reserves

23 November 2009

On June 26 Royal Decree-Law 9/2009 was passed creating the Orderly Bank Restructuring Fund in an aim to avoid bank insolvencies.

The new Royal Decree-Law creates the Orderly Bank Restructuring Fund with the main objective of strengthening the position of lending institutions, pillars of the national financial systems whose role should be to serve as a way out of the current financial crisis.

If the entities do not adopt the necessary measures in response to their shortcomings, the Fund assumes, on the one hand, the work of overseeing the lending institution restructuring process which, in view of the institutions specializations, including financial support of the Fund, is similar to a commercial insolvency procedure.

On the other hand, the Fund is entrusted with contributing to bolstering the capital reserves of the lending institutions, especially when they merge. In this aspect the Fund has a unique role as they acquire the bonds issued by the lending institutions which the latter are then obligated to buy back within five years.

For further information, please contact Nathalie Kühlmann: