BANKING LAW AND CO-PRODUCTION OF PUBLIC SERVICES IN SPAIN

INTRODUCTION

Co-production of public services means an arrangement in which public authorities do not design and deliver a service entirely by themselves. Instead, public bodies cooperate with private organisations, regulated companies, citizens, associations or other institutions in financing, designing or delivering services of public interest.

In Spanish banking law, co-production is important because banks and payment institutions increasingly provide infrastructure that public authorities use for the delivery of public services. Examples include collection of taxes and social-security payments, payment of public benefits, government-backed financing programmes, management of public funds, digital payment infrastructure and financing of public projects.

Spanish law does not treat ordinary commercial banking as a public service merely because banks cooperate with government. The distinction between a regulated private financial activity and the legal provision of a public service remains important. Co-production therefore operates through contracts, concessions, collaboration agreements and regulated institutional arrangements rather than through an automatic conversion of banks into public authorities.

The principal framework comes from Spanish administrative law, public-procurement law, banking regulation and EU law.

LEGAL AND REGULATORY FRAMEWORK

1. Spanish Constitution

The constitutional foundation begins with the Spanish Constitution of 1978. Article 103 requires public administration to serve the general interest objectively and to operate according to principles including effectiveness, hierarchy, decentralisation, coordination and submission to law.

Article 128 is also important. It recognises that the country's wealth, regardless of ownership, is subordinated to the general interest and permits essential resources or services to be reserved to the public sector where legislation so provides.

Consequently, private participation in service delivery does not remove the government's responsibility to respect legality, equality and the general interest.

2. Law 40/2015 on the Legal Regime of the Public Sector

Law 40/2015 (Ley 40/2015, de Régimen Jurídico del Sector Público) provides an important institutional framework for cooperation within Spain's public sector.

It regulates principles governing public bodies, administrative relationships and different forms of cooperation. Agreements between institutions may establish coordinated activities without necessarily creating an ordinary public procurement relationship.

For banking, the distinction matters. A public authority may cooperate with financial institutions in programmes involving financing or payment infrastructure, but the legal character of the arrangement determines whether procurement, banking, competition and administrative-law requirements apply.

3. Law 9/2017 on Public Sector Contracts

The most important legislation for contracting private operators is Law 9/2017 on Public Sector Contracts (Ley de Contratos del Sector Público – LCSP).

The LCSP implemented EU public procurement and concession directives into Spanish law. It places strong emphasis on competition, transparency, equal treatment, proportionality and efficient use of public resources.

Importantly, the 2017 legislation abolished the former specific category of the public-private collaboration contract, because its objectives could generally be achieved through other contractual forms, particularly concessions.

This does not mean public-private co-production disappeared. Instead, cooperation is structured through instruments such as service contracts, concessions, mixed contracts and other legally recognised arrangements.

The LCSP also recognises that public authorities retain freedom to provide certain services themselves or organise them through alternative lawful arrangements.

BANKS AS CO-PRODUCERS RATHER THAN PUBLIC AUTHORITIES

An important legal distinction is that cooperation does not ordinarily make a private bank part of the public administration.

Suppose a Spanish authority appoints financial institutions to facilitate payments connected with a public programme. The government remains responsible for the legality of the programme, while the participating bank remains responsible for complying with the banking and contractual rules applicable to its activities.

This produces dual accountability.

The public body must comply with administrative and public-law obligations.

The bank must comply with financial regulation, consumer protection, payment-services rules, anti-money-laundering requirements, operational-resilience requirements and applicable data-protection obligations.

The contractual arrangement then connects the two systems.

FORMS OF CO-PRODUCTION IN BANKING

1. Public Financing Programmes

Banks can participate in public financing schemes under which public institutions provide guarantees, funding support or other financial mechanisms while commercial banks originate or administer financing.

This is a classic co-production structure because the public authority supplies policy objectives and public support, while banks contribute lending infrastructure, credit assessment and customer-facing services.

However, public involvement does not automatically remove normal banking duties.

2. Collection of Public Revenue

Banks may cooperate with public authorities in collecting taxes, charges or other public payments.

The bank supplies the payment infrastructure, while the legal authority for the underlying public obligation remains with the state.

This arrangement illustrates an important principle: delivery can be shared without transferring the underlying sovereign power.

3. Distribution of Public Benefits

Financial institutions may provide accounts and payment infrastructure through which pensions, grants or other public payments reach beneficiaries.

The state determines entitlement. The bank facilitates financial execution.

The distinction is essential because a bank should not ordinarily acquire the public authority's discretionary power merely by processing the payment.

4. Financing Public Infrastructure

Banks may finance projects delivered through public contracts or concessions.

The LCSP contains an extensive framework governing concessions. Spanish law also preserves special rules where a service concession concerns a public service, including rules concerning the legal regime of the service and public authorities' supervisory powers.

Banks therefore may finance the infrastructure without themselves becoming the public-service provider.

KEY LEGAL PRINCIPLES

Transparency and Equal Treatment

Where public authorities select private institutions through procurement, the process must respect the applicable principles of transparency, competition and equal treatment.

A government body generally cannot structure collaboration simply to give an unjustified competitive advantage to a preferred financial institution.

Public Accountability

Outsourcing or co-producing a function does not necessarily eliminate governmental responsibility.

Public authorities must retain sufficient control to ensure that public objectives and legal standards are respected.

Consumer Protection

Banks participating in government-supported programmes remain subject to relevant consumer and banking obligations.

Spanish courts have repeatedly emphasised substantive protection of banking customers. Although these cases do not specifically concern co-production, they are relevant because public involvement cannot normally be treated as eliminating the private bank's independent legal duties.

Data Protection

Co-production can require information to move between government bodies and financial institutions. Such processing remains subject to the GDPR and Spanish Organic Law 3/2018.

The parties must determine their respective legal roles, purposes of processing, legal bases, security obligations and responsibility for protecting personal information.

CASE LAWS

1. Constitutional Court Judgment 31/2010

STC 31/2010 is important in understanding the constitutional distribution of public powers and the organisation of public administration in Spain.

Its broader relevance to co-production is that organisational innovation and decentralised service arrangements remain subject to the constitutional allocation of governmental powers. Private participation cannot be used to circumvent constitutional competence rules.

2. Constitutional Court Judgment 84/2015

STC 84/2015 concerned aspects of public-sector organisation and institutional arrangements.

Its broader significance is that legislative and administrative decisions concerning public organisational structures remain constrained by constitutional rules. Co-production therefore operates within, rather than outside, the public-law framework.

3. Parking Brixen GmbH v Gemeinde Brixen — C-458/03

The Court of Justice of the European Union examined the conditions surrounding the award of a public-service concession.

The judgment is important to Spain because EU principles concerning transparency and equal treatment influence Spanish public procurement law.

Principle: public authorities cannot avoid fundamental procurement principles merely by characterising an arrangement as a special form of public-private cooperation.

4. Stadt Halle — C-26/03

The CJEU considered whether a public authority could award arrangements directly to an entity involving private capital.

The Court adopted a restrictive approach toward the in-house exception where private participation existed.

Relevance: Spanish authorities considering cooperation with banks or private financial operators must determine whether procurement requirements apply rather than assuming that institutional cooperation automatically permits direct award.

5. Teckal Srl v Comune di Viano — C-107/98

This landmark CJEU decision established the foundations of the in-house doctrine.

A public authority can, under specified conditions, use an entity it controls without applying ordinary procurement procedures.

The principle helps distinguish genuine internal public-sector delivery from external co-production involving independent private businesses.

6. Commission v Spain — C-84/03

The CJEU examined Spain's implementation of EU public procurement requirements and found aspects of Spanish legislation incompatible with EU obligations.

The judgment is particularly relevant because it demonstrates that Spain cannot define exclusions from procurement rules so broadly that EU procurement protections become ineffective.

For banking-related co-production, the lesson is that the legal form chosen by public authorities cannot automatically remove an arrangement from EU procurement law.

7. Spanish Supreme Court Banking Jurisprudence

Spanish Supreme Court jurisprudence also demonstrates that banks retain independent legal responsibilities toward customers. For example, STS 40/2020, STS 86/2020 and STS 117/2020 dealt with banks' duties in relation to the marketing of subordinated financial products and the calculation of damages following breach of information or advisory obligations.

These judgments are not direct co-production cases. Their importance here is more limited but useful: participation in a regulated or publicly supported financial environment does not eliminate the bank's separate private-law and regulatory obligations.

RISKS AND ACCOUNTABILITY

Co-production creates several legal risks.

First, responsibility may become blurred. A citizen dealing with a bank in connection with a government programme may not know whether the bank or public authority is responsible for a particular decision.

Second, private commercial incentives can conflict with public-policy objectives. A bank naturally evaluates credit and risk, whereas a public programme may pursue inclusion or broader social objectives.

Third, public contracting creates competition risks. Selection criteria must not improperly favour particular institutions.

Fourth, digital co-production increases cybersecurity, privacy and operational risks.

Spanish law therefore attempts to combine private expertise with continued public accountability.

CONCLUSION

Co-production of public services in Spanish banking law describes the increasingly important cooperation between public authorities and regulated financial institutions in financing, payment infrastructure, public programmes and service delivery.

The Spanish Constitution provides the public-interest foundation, Law 40/2015 regulates public-sector organisation and cooperation, and Law 9/2017 provides the central procurement and concession framework. Significantly, the LCSP abolished the former specific public-private collaboration contract but retained other mechanisms through which public and private actors can cooperate.

EU cases such as Teckal, Stadt Halle, Parking Brixen and Commission v Spain reinforce transparency, competition and accountability requirements. Spanish banking jurisprudence further demonstrates that private financial institutions remain independently responsible for their banking and consumer-law obligations.

The central legal principle is therefore that public services may be co-produced, but public responsibility cannot simply be outsourced. Banks may provide finance, technology, payment systems and operational expertise, while public authorities must continue to safeguard legality, equality, transparency and the public interest.