Banking Law and Constitutional Pluralism in Banking Regulation in Spain

Introduction

Constitutional pluralism in Spanish banking regulation describes the coexistence of several legally authoritative regulatory levels: the Spanish Constitution, national legislation, Autonomous Community powers, European Union law, and European banking institutions. Banking regulation therefore cannot be understood simply as legislation enacted by the Spanish Parliament. Regulatory authority is distributed among the State, Autonomous Communities, the Banco de España, the European Central Bank (ECB), EU institutions, and—in disputes—the Spanish Constitutional Court and the Court of Justice of the European Union (CJEU).

This plural structure is particularly visible in supervision, regulation of savings banks (cajas de ahorro), prudential requirements, bank resolution and protection of fundamental rights. The Banco de España itself describes Spanish financial regulation as comprising legislation originating at Spanish, Autonomous Community and European levels.

Thus, constitutional pluralism is essentially a system for reconciling national constitutional autonomy, territorial decentralisation and the primacy and effectiveness of EU banking law.

Legal and Constitutional Framework

The starting point is the Spanish Constitution of 1978. Article 149.1.11 gives the State exclusive competence concerning the foundations of the organisation of credit, banking and insurance. Other State competences—particularly economic planning under Article 149.1.13—also support national banking regulation.

However, Spain is territorially decentralised. Autonomous Communities possess regulatory and administrative responsibilities under their Statutes of Autonomy, historically especially concerning savings banks and credit cooperatives.

The Constitutional Court therefore distinguishes between basic State regulation and the implementation or supplementary powers belonging to Autonomous Communities.

A second constitutional layer comes from EU membership. Banking supervision has become heavily Europeanised through the Banking Union. Major institutions may be directly supervised by the ECB under the Single Supervisory Mechanism, while resolution may involve the Single Resolution Board under the Single Resolution Mechanism.

The Banco Popular resolution demonstrates this multi-level system particularly clearly: the ECB determined that Banco Popular was failing or likely to fail, while resolution proceeded under Regulation (EU) No 806/2014 through the European resolution architecture.

Constitutional Pluralism in Practice

Spanish banking constitutionalism consequently operates through overlapping rather than completely separate legal orders.

First, State unity remains important. The State may establish basic rules necessary to ensure monetary, prudential and financial stability throughout Spain.

Second, territorial autonomy must be respected. State competence cannot automatically eliminate constitutionally protected Autonomous Community powers.

Third, EU integration has transformed the traditional State–Autonomous Community relationship. Decisions concerning Spanish banks may now originate with European institutions and subsequently produce consequences before Spanish regulators and courts.

Fourth, fundamental constitutional rights remain relevant. Banking sanctions, resolution proceedings and regulatory enforcement may engage property rights, legality, judicial protection, equality and principles governing administrative punishment.

Constitutional pluralism therefore requires coordination between institutions rather than the absolute supremacy of one domestic regulator over every aspect of banking.

Important Case Laws

1. STC 48/1988, 22 March 1988

This is an important Constitutional Court authority concerning savings banks. The Court treated cajas de ahorro as a distinct constitutional field rather than simply assimilating them to ordinary credit institutions.

Its broader importance is that national banking competence does not automatically extinguish Autonomous Community responsibilities. Constitutional banking regulation must accommodate both State-wide financial interests and territorial autonomy.

2. STC 135/1992

The Constitutional Court examined the meaning of State competence over the basic organisation of credit and banking. It recognised the Banco de España as an important State institution exercising regulatory, supervisory and sanctioning functions.

The Court also stressed that what constitutes "basic" regulation is capable of evolving. This is significant because banking is technically complex and rapidly changing. Constitutional allocation of powers cannot therefore be frozen according to an outdated model of financial regulation.

3. STC 178/1992

This judgment further illustrates the balance between centralised banking regulation and Autonomous Community competence.

The Court recognised that some decisions involving substantial technical discretion must be taken from a unitary national perspective. Consequently, certain executive functions can legitimately form part of the State's basic banking competence.

The case illustrates a central principle of constitutional pluralism: decentralisation exists, but financial stability and uniformity can justify central intervention where a genuinely national regulatory decision is required.

4. STC 96/1996

This decision developed the constitutional relationship between State banking powers, the Banco de España and Autonomous Communities.

The Constitutional Court's jurisprudence recognises that State banking competence can justify assigning certain executive responsibilities to the Banco de España. However, this cannot become a general mechanism for emptying Autonomous Community competences of meaningful content. This approach is reflected in the Constitutional Court's later discussion of the relevant line of authority.

The principle is therefore one of constitutional balance rather than absolute centralisation.

5. STC 40/2016

This case directly involved Spanish measures adopted to adapt national law to EU rules concerning the supervision and solvency of financial institutions.

The Ombudsman challenged provisions of Royal Decree-Law 14/2013 on constitutional grounds involving, among other matters, pluralism, political participation and local autonomy. The Constitutional Court ultimately declared the constitutional proceedings extinguished because the challenged provisions had been repealed.

Although the merits were therefore not finally resolved, the litigation is significant because it demonstrates how implementation of European banking requirements can intersect with Spanish constitutional structures.

6. STC 179/2023 – Banco Santander/Banco Popular

This modern case provides an excellent example of multi-level banking constitutionalism.

Following Banco Popular's resolution and subsequent absorption by Banco Santander, Santander was sanctioned in connection with anti-money-laundering failures originally attributable to Banco Popular.

Santander argued that imposing liability upon it violated constitutional principles concerning legality, culpability and the personal nature of sanctions under Article 25.1 of the Constitution.

The Constitutional Court rejected the challenge. It accepted the transmission of responsibility where the corporate restructuring maintained substantial economic identity.

The judgment is important because Spanish constitutional principles were applied against a factual background produced by the EU bank-resolution regime.

7. CJEU, Joined Cases C-775/22, C-779/22 and C-794/22, Banco Santander (Resolution of Banco Popular II), 5 September 2024

These preliminary references from the Spanish Supreme Court concerned investors affected by Banco Popular's resolution.

The CJEU interpreted the Bank Recovery and Resolution Directive in relation to bail-in, write-down of capital instruments, shareholder and creditor rights and actions based upon defective information concerning financial instruments.

The cases demonstrate judicial pluralism especially clearly: disputes beginning in Spanish courts may require authoritative interpretation of EU banking law from the CJEU before national courts determine the consequences.

8. CJEU, Case C-687/23, Banco Santander (Resolution of Banco Popular III), 11 September 2025

The CJEU subsequently considered claims relating to Banco Popular instruments that had been initiated before resolution measures were adopted.

It held that the relevant EU resolution provisions did not prevent those pre-existing rights arising from actions for nullity and damages from being enforced against Banco Santander in the circumstances addressed by the judgment.

This decision is especially significant for constitutional pluralism because it shows the interaction between EU resolution objectives, investor rights and proceedings before Spanish courts.

Key Constitutional Principles

Several principles emerge from these cases:

1. Unity of the financial system: Spain may maintain national basic rules necessary for stability and coherent banking supervision.
2. Autonomous Community autonomy: constitutionally recognised regional powers cannot simply be eliminated by labelling every banking matter "basic."
3. Institutional competence of Banco de España: technical supervisory functions may legitimately be centralised where uniform national administration is necessary.
4. EU primacy and effectiveness: Spanish banking legislation and courts must operate consistently with binding EU banking law.
5. Judicial dialogue: the Constitutional Court, Supreme Court and CJEU perform different but interacting functions.
6. Fundamental-rights control: Europeanisation of banking regulation does not make constitutional protections irrelevant. Administrative sanctions and enforcement measures remain subject to legality and judicial review.

Conclusion

Constitutional pluralism in Spanish banking regulation means that banking authority is distributed across interconnected constitutional and European legal orders. Spain retains constitutional responsibility for the basic organisation of credit and banking, while Autonomous Communities retain constitutionally recognised responsibilities, particularly visible historically in the regulation of savings banks. The Banco de España performs important central supervisory functions, while EU Banking Union institutions have assumed major responsibilities for prudential supervision and bank resolution.

The Constitutional Court's decisions in STC 48/1988, STC 135/1992, STC 178/1992, STC 96/1996, STC 40/2016 and STC 179/2023, together with the CJEU's Banco Popular/Banco Santander judgments, demonstrate that Spanish banking law is no longer governed through a single hierarchical regulatory source.

Instead, the modern system depends upon coordination, competence allocation, EU-law effectiveness, constitutional safeguards and judicial dialogue. Constitutional pluralism therefore provides a useful framework for understanding how Spain reconciles national financial stability, regional autonomy, European integration and individual rights within contemporary banking regulation.