2023 FROB Annual Report

• FROB continues its work on the resolution of financial institutions through, among other practices, simulations and tests of the institutions’ capabilities, in close coordination with other national, European, and international resolution authorities, while closely monitoring developments in both the Spanish and global banking sectors.
• It also continues to oversee its investee institutions, manage the guarantees granted, and address litigation arising from irregular conduct detected in institutions that received public aid, with final court rulings in its favour totalling over 302 million euros.

Madrid, 16/07/2024.

FROB has today published its 2023 Annual Report, highlighting the key milestones in its activities over the past year. This period was marked, in the international financial context, by the bank failures in the United States and Switzerland, and, at the European level, by the presentation of the European Commission’s proposal for the reform of the crisis management and deposit insurance (CMDI) framework.

In this context, Álvaro López Barceló, Chairperson of FROB, emphasised in his institutional message that “the Banking Union, and in particular Spanish banks, have demonstrated their resilience against the contagion that spread across jurisdictions.” He also remarked that “these events have once again reminded us of the destabilising potential of turbulence in the financial sector, a sector critical to the functioning of the entire economy, and the importance of having strong banks under robust supervision and resolution frameworks”.

In this financial year, FROB has continued to work on further developing its resolution preparation, with the aim of ensuring an effective response in the event of a crisis, while also managing its investee institutions. The details of the main activities carried out by FROB in 2023 are as follows:

Activity within the European Resolution Framework

• FROB has continued to exercise its powers and responsibilities in the resolution of financial institutions, working in close collaboration with the Single Resolution Board (SRB) and the Spanish preventive resolution authorities (the Bank of Spain and the CNMV). It has also continued to work hard on improving its own preparedness, as well as that of the institutions, for potential resolution cases. These efforts include, among other activities, conducting simulations, reviewing and improving crisis management procedures for both significant and less significant institutions, and participating in the testing of institutional capabilities.
• Close attention has also been paid to the events in 2023 that affected the banking sector in the United States, the United Kingdom, and Switzerland, and their potential impact on the Spanish financial sector, particularly those institutions with subsidiaries or branches in Spain. FROB has continued to provide technical advice to the Spanish representation at meetings of the European Commission and the Council of the European Union regarding the legislative proposal for the reform of the crisis management and deposit insurance (CMDI) framework. In this regard, the Chairperson of FROB has highlighted that “even if an agreement is reached on the CDMI proposal, we must not forget that there are still important elements to address in achieving a fully developed European crisis management framework, such as the European Deposit Insurance Scheme (EDIS). This third pillar of the Banking Union is a logical and necessary step” .
• In 2023, as in previous years, contributions were collected for the Resolution Funds (financing instruments that resolution authorities may use to support resolution measures), amounting to a total of 1,008 billion euros (1,005 billion for the Single Resolution Fund and 3 million for the National Resolution Fund). In the early months of 2024, the SRB confirmed that the financial resources of the SRF have reached the target amount and as a result, no contributions will be required in 2024.

Activities related to previous banking restructurings

• In this area, FROB has continued to focus on overseeing its stake in CaixaBank, through BFA, and in Sareb, while also managing the guarantees granted during previous divestment processes and addressing litigation related to alleged irregularities in institutions that received public aid.
• In particular, BFA’s annual accounts for 2023 report a net profit of 335 million euros, primarily due to the 300 million euros in dividends received from CaixaBank’s 2022 results, based on its stake in the bank. This resulted in BFA’s first dividend distribution to FROB during the 2024 financial year. As for Sareb, in 2023 the company reinforced its commitment to social utility by promoting access to affordable housing for citizens, while continuing the divestment of its real estate and financial assets.
• In 2023, the guarantee granted through the Asset Protection Scheme (APS) for Banco de Valencia reached full closure and maturity, with FROB paying out a total of 206 million euros, significantly less than the 600 million euros initially estimated when the guarantee was issued. The final closure of the remaining active guarantees is expected to occur during the 2024 financial year.
• Lastly, FROB continues its efforts to pursue and penalise alleged irregularities detected in various credit institutions that received public aid. FROB remains involved in several legal proceedings, currently at different stages. To date, final court rulings have awarded more than 302 million euros in FROB’s favour.