Banking Law and Multilevel Governance in Spain

1. Introduction

Multilevel governance in Spanish banking law refers to the way banking regulation and supervision are divided among several levels of public authority rather than being controlled exclusively by the Spanish State.

The Spanish banking system operates through an interconnected structure involving:

European Union institutions

European Central Bank (ECB)

Single Supervisory Mechanism (SSM)

European Banking Authority (EBA)

Single Resolution Board (SRB)

Banco de España

Spanish Government and national legislators

Spanish courts

Other national authorities, depending on the issue

The important point is that these authorities do not all exercise the same power.

A simplified structure is:

EU Treaties and EU legislation

↓

ECB / EBA / SRB

↓

SSM and Banking Union

↓

Banco de España + Spanish authorities

↓

Spanish banks and financial institutions

↓

Customers, depositors and investors

This system has developed because banking activity can produce risks that cross national borders. The European Banking Union therefore places important supervisory and resolution responsibilities at European level while leaving substantial implementation and supervisory responsibilities with national authorities.

2. Meaning of Multilevel Governance

Multilevel governance means that authority is distributed vertically and horizontally.

Vertical dimension

European Union

↓

Spain

↓

National authorities

↓

Regional/local institutions where their legally defined competences are relevant.

Horizontal dimension

At the European level:

ECB

EBA

SRB

European Commission

CJEU

At the Spanish level:

Banco de España

Ministry of Economy

Spanish courts

other competent authorities.

Each institution performs a different function.

3. European Union Level

The European level provides the most important framework for modern Spanish banking regulation.

EU institutions establish rules concerning:

prudential requirements;

capital;

liquidity;

governance;

bank supervision;

recovery and resolution;

deposit protection;

payment services;

consumer protection; and

financial stability.

EU regulations generally apply directly, while directives require implementation through national law.

This creates the first layer of multilevel governance:

EU legal framework

↓

Spanish implementation and enforcement

↓

Banking institutions.

4. European Central Bank

The European Central Bank occupies a central position in the system.

Under the Single Supervisory Mechanism Regulation, the ECB has direct prudential supervisory responsibility for significant credit institutions.

Its responsibilities include areas such as:

authorization of credit institutions;

withdrawal of authorization;

qualifying-holding assessments;

prudential supervision;

capital requirements;

governance;

risk management;

internal models; and

supervisory measures.

For significant Spanish banks, therefore, prudential supervision cannot be understood as purely national regulation.

5. Banco de España

Banco de España remains Spain's national central bank and a major banking supervisor.

It operates within the Eurosystem and SSM.

Its responsibilities include:

participating in ECB supervision;

directly supervising less significant institutions within the SSM framework;

conducting inspections;

collecting supervisory information;

monitoring financial risks;

implementing certain national supervisory responsibilities;

supervising payment and certain other financial activities; and

contributing to financial stability.

The result is not:

ECB OR Banco de España.

It is:

ECB + Banco de España within the SSM framework.

6. Significant and Less Significant Institutions

The SSM distinguishes between:

Significant Institutions

These are generally subject to direct ECB supervision.

Less Significant Institutions

These are primarily supervised by national competent authorities, such as Banco de España, under the overall SSM framework.

This distinction is fundamental to multilevel governance.

For example:

Large Spanish bank

→ direct ECB supervision

while:

smaller Spanish credit institution

→ direct national supervision by Banco de España, subject to the SSM framework.

The division is therefore based partly on institutional significance rather than simply nationality.

7. European Banking Authority

The European Banking Authority (EBA) performs a different role from the ECB.

The EBA primarily contributes to:

harmonization of banking regulation;

technical standards;

supervisory convergence;

guidelines;

stress-testing frameworks;

cooperation between national supervisors; and

EU-wide banking standards.

The EBA does not simply replace national supervisors.

Instead:

EBA

↓

common European standards

↓

National supervisors + ECB

↓

implementation and supervision.

This is an important example of network governance.

8. Single Resolution Board

The Single Resolution Board (SRB) deals with resolution rather than ordinary prudential supervision.

If a significant banking institution becomes failing or likely to fail, the European resolution framework may become relevant.

The SRB can prepare and adopt resolution decisions within the Banking Union framework.

Spain's experience with Banco Popular Español provides a particularly important illustration.

Banco Popular was directly supervised by the ECB, while the SRB adopted the resolution scheme in 2017. The European Commission subsequently endorsed the scheme.

Thus a single Spanish bank could simultaneously be subject to:

ECB prudential supervision

SRB resolution authority

Spanish legal institutions.

9. Spanish Government

The Spanish State retains substantial responsibilities.

The Government and national legislature remain responsible for areas including:

national banking legislation;

implementation of EU directives;

institutional organization;

consumer and civil-law rules within their competence;

administrative enforcement;

taxation;

certain financial-sector policies; and

national crisis-management functions.

However, national legislation must comply with EU law.

This produces an important hierarchy:

EU law

↓

Spanish implementing legislation

↓

national administrative action

↓

judicial review.

10. Spanish Courts

Spanish courts are another important level.

They resolve disputes involving:

banks and customers;

contractual obligations;

mortgage enforcement;

financial products;

administrative decisions;

consumer protection; and

liability.

Spanish courts also cooperate with the CJEU through the preliminary-reference procedure.

A Spanish court can ask the CJEU to interpret EU law when necessary for deciding a case.

This creates a judicial governance network:

Spanish court

↓

preliminary reference

↓

CJEU

↓

interpretation of EU law

↓

Spanish court applies interpretation.

This mechanism has been especially important in Spanish banking disputes.

11. CJEU

The Court of Justice of the European Union (CJEU) provides authoritative interpretation of EU law.

Its banking jurisprudence has addressed:

ECB powers;

SSM supervision;

banking resolution;

consumer protection;

mortgage law;

monetary policy;

capital requirements; and

institutional competence.

The CJEU therefore acts as an important constitutional court for the European banking framework.

12. European Commission

The European Commission also participates in banking governance.

Its functions include:

proposing EU legislation;

monitoring implementation;

enforcing EU law in appropriate circumstances;

participating in the resolution framework; and

adopting certain measures under EU legislation.

In the Banco Popular resolution, for example, the Commission endorsed the SRB resolution scheme.

13. National Administrative Law

Spanish banking supervisors exercise public powers.

Their decisions can potentially affect:

authorization;

sanctions;

capital requirements;

governance;

supervisory restrictions;

financial activities; and

resolution-related rights.

These decisions are therefore subject to legal safeguards and judicial review.

The multilevel model does not mean that regulators have unlimited discretion.

Each authority must act:

within its legal competence;

according to applicable procedural requirements;

with adequate reasoning; and

subject to judicial review where legally available.

14. Principle of Conferral

EU institutions do not possess unlimited general authority.

Under the principle of conferral, the Union acts only within competences conferred upon it by the Treaties.

This matters greatly in banking.

The EU has extensive banking and financial competences, but the legal basis for each European action must be identified.

The CJEU therefore frequently examines:

Who has competence?

Under which Treaty provision?

What institution can exercise that power?

What procedure must it follow?

These questions form the constitutional foundation of multilevel banking governance.

15. Principle of Subsidiarity

Subsidiarity is particularly relevant where competence is shared.

The basic idea is that decisions should be taken at the appropriate level rather than automatically at the highest possible level.

In banking, however, the SSM reflects the reality that certain risks cannot be adequately managed at purely national level.

A major cross-border bank may operate in:

Spain + France + Germany + Italy + other jurisdictions.

A purely national supervisory approach could therefore produce fragmented oversight.

European supervision seeks to address this problem.

16. Proportionality

European banking authorities must also respect proportionality.

Regulatory intervention should remain connected to the legitimate objective being pursued.

This is particularly important in prudential supervision because regulatory decisions can have significant effects on:

banks;

shareholders;

customers;

markets; and

national economies.

The CJEU has repeatedly examined proportionality when reviewing ECB monetary and prudential measures.

17. Case Law 1 — Landeskreditbank Baden-Württemberg v ECB, C-450/17 P

Date

8 May 2019

Subject

Single Supervisory Mechanism.

Facts

Landeskreditbank argued that it should not be subject to direct ECB supervision because it was sufficiently supervised at national level.

Decision

The CJEU upheld the SSM framework and rejected the argument that national supervision alone displaced the ECB's competence.

Importance for Spain

The case establishes an important principle:

national supervisory competence does not automatically exclude European supervisory competence.

For Spain, this explains why large Spanish banks can be directly supervised by the ECB even though Banco de España remains a major supervisory authority.

The case is therefore a foundational authority for the vertical distribution of banking supervision.

18. Case Law 2 — Berlusconi and Fininvest v Banca d'Italia and Others, C-219/17

Date

19 December 2018

Subject

ECB and national authorities under the SSM.

Background

The dispute concerned an acquisition of a qualifying holding in an Italian bank.

The national competent authority prepared a proposal, while the ECB ultimately adopted the supervisory decision.

Principle

The CJEU examined the integrated administrative procedure created by the SSM.

The national authority and ECB do not operate as two completely independent administrative systems.

Importance for Spain

The case demonstrates that SSM governance can involve:

National authority

→ investigation/proposal

→ ECB

→ final European decision.

This is a classic example of integrated multilevel administration.

19. Case Law 3 — Fininvest and Berlusconi v ECB, Joined Cases C-512/22 P and C-513/22 P

Date

19 September 2024

Subject

Qualifying holding and ECB prudential supervision.

The CJEU annulled the ECB decision challenged in the proceedings after finding that the relevant ownership situation did not constitute a new acquisition of a qualifying holding in the circumstances considered.

Importance

The judgment demonstrates that even when national and European authorities cooperate closely, the final ECB decision remains subject to judicial review against the requirements of EU law.

It therefore illustrates:

multilevel administration

European judicial control.

20. Case Law 4 — Banco Popular Resolution Litigation

Core proceedings

Multiple cases arose from the 2017 resolution of Banco Popular Español.

Banco Popular was under direct ECB prudential supervision. The SRB adopted the resolution scheme, and the Commission endorsed it.

Importance

The litigation illustrates one of the clearest examples of multilevel governance involving a Spanish bank:

ECB

→ prudential supervision

SRB

→ resolution scheme

European Commission

→ endorsement

Spanish courts

→ national litigation and references where appropriate

CJEU

→ interpretation and judicial review of EU law.

This is not simply theoretical multilevel governance; it operated in a real Spanish banking crisis.

21. Case Law 5 — García Fernández and Others v Commission and SRB, C-541/22 P

Date

4 October 2024

Subject

Banco Popular resolution.

Issues

The CJEU examined issues concerning:

resolution objectives;

SRB obligations;

Commission endorsement;

valuation;

confidentiality;

access to documents;

interests of shareholders and creditors.

The Court dismissed the appeal.

Importance

This case shows how multilevel governance creates corresponding accountability.

The SRB may possess specialized European powers, but affected shareholders and creditors remain entitled to judicial review within the EU legal order.

22. Case Law 6 — Banco Santander and Others, Joined Cases C-775/22, C-779/22 and C-794/22

Judgment

5 September 2024

Background

The cases originated from the Spanish Supreme Court and concerned litigation following the resolution of Banco Popular.

Issues included:

bail-in;

write-down and conversion of capital instruments;

rights of shareholders and creditors;

allegedly incorrect information;

damages;

contractual remedies; and

the interaction between national private law and EU resolution law.

The CJEU's judgment addressed how Directive 2014/59/EU interacts with national remedies following resolution.

Importance

This is an especially useful Spanish example of multilevel governance because:

Spanish Supreme Court

→ referred questions

↓

CJEU

→ interpreted EU resolution law

↓

Spanish proceedings

→ continue under the resulting legal interpretation.

23. Case Law 7 — Dirección General de Defensa de la Competencia v Asociación Española de Banca Privada, C-67/91

Date

16 July 1992

Subject

Banking and competition-law cooperation.

Background

The dispute arose from Spanish banking investigations and the use of information obtained through European competition-law mechanisms.

Principle

The case concerned the interaction between national authorities and European competition-law institutions.

Importance

Although predating the Banking Union and SSM, it illustrates an older form of multilevel financial governance:

Spanish authority

European Commission

EU competition law

CJEU judicial interpretation.

It demonstrates that European influence on Spanish banking regulation existed before the modern Banking Union.

24. Case Law 8 — Asociación Española de Banca v Commission, T-236/10

Date

29 March 2012

Subject

Spanish banking association and EU institutional action.

Principle

The case illustrates the ability of participants in the Spanish banking sector to challenge EU-level administrative action within the European judicial system.

Importance

This is significant for multilevel governance because affected banks and banking associations are not merely passive recipients of regulation.

They can participate in the European administrative and judicial system through legally available procedures.

25. Banking Supervision as a Network

Spanish banking governance can be visualized as a network:

ECB

↕

Banco de España

↕

EBA

↕

National competent authorities

↕

SRB

↕

European Commission

↕

Spanish courts

↕

CJEU

These institutions exchange:

information;

supervisory assessments;

regulatory standards;

decisions;

technical expertise; and

judicial interpretations.

Therefore, multilevel governance is not simply a hierarchy.

It is also a network of institutions with overlapping functions.

26. Prudential Supervision

Prudential supervision focuses on the safety and stability of financial institutions.

Typical matters include:

capital adequacy;

liquidity;

credit risk;

market risk;

governance;

internal controls;

risk management;

internal models; and

major exposures.

For significant Spanish banks, these functions are principally integrated into the SSM.

27. Conduct Supervision

Conduct regulation is different.

It concerns matters such as:

customer protection;

transparency;

investment services;

payment services;

unfair contractual terms;

financial advertising; and

treatment of consumers.

Depending upon the activity, responsibility may be divided among:

Banco de España;

Spanish consumer authorities;

CNMV;

European authorities; and

courts.

This creates another form of multilevel governance.

28. Banking Resolution

Resolution provides a particularly strong example.

A simplified process is:

ECB

↓

determines whether a significant bank is failing or likely to fail, within the applicable framework

↓

SRB

↓

adopts resolution scheme if conditions are met

↓

European Commission

↓

performs its legally assigned role

↓

National Resolution Authorities

↓

implement relevant measures

↓

Courts

↓

provide judicial review.

Banco Popular demonstrated this structure in practice.

29. Deposit Protection

Deposit protection also involves multiple levels.

Spain has a national Fondo de Garantía de Depósitos de Entidades de Crédito (FGD).

The European framework provides harmonized rules concerning deposit protection while national institutions continue to administer important functions.

This demonstrates another common characteristic:

European harmonization

does not necessarily mean

complete European centralization.

30. Payment Services

Payment services illustrate a different distribution.

EU legislation establishes common rules.

Spain implements relevant EU requirements.

Banco de España exercises important supervisory functions over payment institutions and electronic-money institutions.

Banks and payment providers must therefore operate under:

EU standards

Spanish implementation

national supervision.

31. Regional Governments and Banking Law

Spain is a decentralized State with autonomous communities.

However, autonomous communities do not possess unlimited authority over core banking regulation.

The Spanish Constitution reserves important matters concerning:

monetary system;

foreign exchange;

banking;

credit; and

insurance

to the State.

Autonomous communities can have legally defined responsibilities in related areas, but these cannot displace the State's exclusive constitutional competence over the core banking framework.

Therefore, the multilevel model should not be confused with a federal system in which every autonomous community independently regulates banks.

32. European and National Legal Supremacy

Another important issue is the relationship between EU law and Spanish law.

Where EU law has validly established rules within EU competence, conflicting national rules may have to give way according to the principles of EU law.

The CJEU has repeatedly developed this principle.

Spanish authorities therefore cannot simply ignore EU banking legislation because national law provides a different outcome.

33. Primacy and Banking Supervision

The Fininvest/Berlusconi litigation is particularly useful here.

The General Court's 2022 judgment expressly addressed issues including:

primacy of EU law;

application of national transposing measures;

rights of defence;

access to the file;

right to be heard; and

effective judicial protection.

The subsequent 2024 CJEU judgment demonstrates that even the operation of the SSM remains subject to legal limits and judicial review.

34. Accountability in Multilevel Governance

Multilevel governance creates a potential accountability problem:

If several institutions participate in one decision, who is legally responsible?

EU banking law addresses this through institutional allocation.

The relevant questions include:

Which institution adopted the final act?

Which institution prepared the proposal?

Which institution has competence?

Which court has jurisdiction?

What legal remedy is available?

Which legal rules govern the decision?

The CJEU has addressed these questions repeatedly in SSM litigation.

35. Advantages of Multilevel Banking Governance

From an institutional perspective, multilevel governance can provide:

Cross-border consistency

Banks operating across several Member States face more harmonized rules.

Risk sharing

Systemic risks can be addressed at European level.

Specialized expertise

ECB, EBA and SRB can develop specialized technical expertise.

Supervisory convergence

National supervisors operate within common European standards.

Crisis coordination

Resolution mechanisms can operate across borders.

Judicial consistency

The CJEU provides authoritative interpretation of EU banking rules.

36. Challenges

Multilevel governance also creates difficulties.

Complexity

Banks may need to understand several layers of rules.

Institutional overlap

ECB, Banco de España, EBA and other authorities may have interconnected responsibilities.

Accountability

It can be difficult for affected parties to identify the correct authority or remedy.

Procedural complexity

Administrative decisions can involve several stages and institutions.

National-European tension

National interests may sometimes differ from broader European supervisory objectives.

Regulatory adaptation

Rules must continually respond to new technologies and financial risks.

37. Practical Example

Suppose a major Spanish bank develops a serious capital problem.

The process might involve:

Step 1 — Bank

Internal risk systems identify deterioration.

Step 2 — Banco de España

Supervisory information is collected and analysed.

Step 3 — ECB

Because the bank is significant, ECB prudential supervision becomes central.

Step 4 — Supervisory measures

The relevant authority can require corrective action under the applicable framework.

Step 5 — Failing-or-likely-to-fail assessment

If the institution reaches the relevant stage, the European resolution framework becomes relevant.

Step 6 — SRB

The SRB considers whether resolution conditions are satisfied.

Step 7 — European Commission

The Commission performs its legally assigned role.

Step 8 — National authorities

Relevant measures are implemented.

Step 9 — Courts

Affected parties may challenge legally reviewable decisions.

This is multilevel governance in practical operation.

38. Relationship Between Banking Law and Constitutional Law

Multilevel governance raises constitutional questions.

Spanish constitutional law determines:

which powers belong to Spain.

EU constitutional law determines:

which competences have been conferred on the EU.

The CJEU determines:

how EU banking powers should be interpreted.

Spanish courts determine:

how national legal disputes should be resolved consistently with EU law.

The result is a layered constitutional system rather than a single-source banking regime.

39. Digital Banking and Future Multilevel Governance

Digitalisation is making the system even more complex.

Consider:

Spanish bank

using:

cloud services;

AI;

European payment infrastructure;

foreign technology providers;

digital assets;

cross-border data processing.

A single financial service may therefore involve:

EU digital regulation

EU banking regulation

Spanish banking law

Banco de España

ECB

data-protection authorities

cybersecurity authorities.

This means future banking governance will increasingly require coordination between financial and technological regulators.

40. Core Principles

The Spanish multilevel banking system can be summarized through the following principles:

EU law provides a major part of the regulatory framework.

ECB directly supervises significant credit institutions within the SSM.

Banco de España remains a central national banking authority.

Less significant institutions are primarily supervised nationally within the SSM framework.

EBA promotes common regulatory and supervisory standards.

SRB handles important Banking Union resolution functions.

European Commission participates in areas assigned by EU legislation.

Spanish courts remain essential for national disputes and judicial review.

CJEU provides authoritative interpretation of EU law.

Spanish autonomous communities do not replace the State's core constitutional competence over banking.

European and national authorities frequently cooperate rather than operate in isolation.

The system is both hierarchical and network-based.

Conclusion

Multilevel governance in Spanish banking law describes a system in which regulatory authority is distributed between European and Spanish institutions.

At the European level, the ECB, EBA, SRB, European Commission and CJEU perform distinct functions. At the Spanish level, Banco de España, the Government, national resolution authorities and Spanish courts retain important responsibilities.

The Single Supervisory Mechanism is the central institutional development. Significant Spanish banks are subject to direct ECB prudential supervision, while Banco de España remains deeply involved in the supervisory system and directly supervises less significant institutions within the SSM framework.

The case law demonstrates this structure clearly. Landeskreditbank confirms the central role of ECB supervision under the SSM. Berlusconi/Fininvest demonstrates the integrated relationship between national competent authorities and the ECB. The 2024 Fininvest judgment demonstrates that ECB supervisory decisions remain subject to judicial review. The Banco Popular litigation provides the clearest Spanish example of European-level banking resolution, with the ECB, SRB and European Commission performing different functions. García Fernández further examined SRB and Commission responsibilities, while the Banco Santander/Popular II cases demonstrate the interaction between the Spanish Supreme Court and the CJEU.

The essential characteristic of the Spanish model is therefore shared and coordinated authority rather than exclusive control by one regulator.

A useful formula is:

EU legislation

ECB/SSM supervision

EBA regulatory convergence

SRB resolution

Banco de España national supervision

Spanish administration and courts

CJEU judicial interpretation

=

Multilevel governance of Spanish banking.

This structure allows banking risks that cross national borders to be addressed at European level while preserving important national administrative, supervisory and judicial functions. At the same time, the complexity of the system makes clear allocation of competence, procedural safeguards and effective judicial review particularly important.