Ethical Banking Cooperative Regulation - Spain

In Spain ethical banking is not a marketing label. It is a specific legal form: Cooperativa de Crédito under special banking law, supervised like any bank but with cooperative governance.

Market examples studied by University of Valencia MDPI case study:

In Spanish market, examples of ethical banks include Triodos Bank, Fiare Ethical Banking, and Coop57.

• Triodos Bank NV Sucursal en España - Dutch bank, branch in Spain since 2004, ethical bank pioneer - focus sustainable development, avoids fossil fuels, weapons, gambling. Founded 1980 Zeist.
• Fiare Banca Etica - Project started 2003 in Basque Country as FIARE - Foundation for Investment and Responsible Saving - Movement of citizens and social organizations. In 2013 merged with Banca Popolare Etica Italy 1999 to create first European Credit Cooperative - operates in Spain and Italy. Now FIARE BANCA ETICA - Spanish subsidiary is credit cooperative regulated by Banco de España.
• Coop57 - Not a bank. Financial services cooperative created in Catalonia in 90s, from 2005 throughout Spanish State. Tool for social transformation, provides loans to social economy entities from members savings. Does not take deposits from public as bank - therefore not under banking license but under cooperative law.

I. Regulatory Framework

1. Constitutional Mandate
Article 129.2 Spanish Constitution ordains government authorities shall promote cooperative societies. Law on Credit Cooperatives fulfils that mandate.

2. Core Laws - As listed by Banco de España - Financial regulation by subject - Credit cooperatives:

Ley 13/1989, de 26 de mayo, de Cooperativas de Crédito - BOE 31 May 1989 - Last revision 1 June 2023
Basic law. Defines credit cooperatives as private institutions whose corporate purpose is to attend to financial needs of members and third parties. Subject to same discipline and intervention regime as commercial banks - Ley 26/1988.

Real Decreto 84/1993, de 22 de enero - Reglamento de Desarrollo de Ley 13/1989 - BOE 19 Feb 1993
Implementing regulation. Details creation, capital requirements, governance through Asamblea General [General Assembly] and Consejo Rector, supervisory role of Banco de España.

Technical: Distinguishes cooperatives from commercial banks by social-economic substrate and specific governance - one member one vote, not one share one vote.[Board]

Ley 10/2014, de 26 de junio, de ordenación, supervisión y solvencia de entidades de crédito - BOE 27 June 2014 - Arts 2.2, 6.7, 34.1 g), 115
Main prudential law transposing CRD IV / CRR. Law 10/2014 also considers as credit entities two historic players: savings banks and credit cooperatives.

Ley 27/1999, de 16 de julio, de Cooperativas - General Cooperatives Law - Subsidiary application.

Regional Cooperative Laws: For regional scope cooperatives:

• Ley 14/2011 Sociedades Cooperativas Andaluzas Art 12, 99.1
• Ley 12/2015 de cooperativas de Cataluña DOGC
• Ley 5/2023 de sociedades cooperativas de Illes Balears Arts 7,26,53
• Decreto 83/2005 Cooperativas de Crédito de Comunidad Valenciana Art 11

Urgent Reform - Royal Decree-Act 11/2017 of 23 June on urgent measures for financial matters - In force 25 June 2017
Council of Ministers approved Royal Decree-Law to reform legal regime of credit cooperatives to strengthen these institutions.

What it modifies:

• Act 13/1989 on Credit Cooperatives
• Royal Decree-Act 16/2011 creating Deposit Guarantee Fund of Credit Institutions
• Act 11/2015 on recovery and resolution of credit institutions
• Creates new category of liabilities all credit institutions can issue: ordinary non-preferential / subordinated senior debt - to comply with MREL.
• Allows creation of Institutional Protection Mechanisms [IPMs / SIP in Spanish] - Mutual support systems to strengthen resistance capabilities. Similar to German model. Members mutualize solvency.
• Clarifies regime: Members whose reimbursement [of capital contributions] is at stake - if cooperative has losses, Banco de España can restrict redemption.
• With few exceptions, credit cooperatives are under control of Banco de España and not ECB, unlike large banks - Important for ethical banks - they are Less Significant Institutions.

Authorisation Regime - Since 1 Nov 2014:
Credit institutions need authorisation before receiving funds from public. Granting authorisation is responsibility of European Central Bank, while all information collected and provided by Banco de España. In case of savings banks and certain credit cooperatives, authorisation granted by corresponding regional authorities following report from Banco de España. Banco de España is in charge of supervision.

Ley 26/2013, de 27 Dec, de cajas de ahorros y fundaciones bancarias - Savings Banks Law - Applies indirectly via IPMs.

II. What Makes Ethical Cooperative Different Legally?

1. Governance:

• Asamblea General - Supreme body - one person one vote regardless of capital.
• Consejo Rector - elected.
• Capital contributions - aportaciones - variable capital, redeemable but subject to solvency.
• Profit distribution limited - Mandatory reserve fund - Fondo de Reserva Obligatorio - at least 20% profit, plus Fondo de Educación y Promoción.

2. Operations with Third Parties Limit:
Under Law 13/1989, operations with non-members limited to 50% of total resources - after 2017 reform increased. Ethical banks like Fiare use exemption for social economy entities.

3. Ethical Charter as Binding:
Fiare and Triodos have internal ethical codes - Exclusion List - No financing of arms, fossil fuels, gambling, etc. Under Spanish contract law, this charter becomes part of pre-contractual information duty under Law 5/2019 Regulating Real Estate Credit Agreements and MiFID. Breach can be deemed misleading.

4. Transparency Obligation:
Under Banco de España Circular 2/2016 and EU SFDR, ethical bank must publish where money goes - Triodos publishes every loan.

III. Case Laws - Spain Specific

A. Triodos Depository Receipts [CDA] Litigation - Spanish Supreme Court 2025 - The Main Ethical Banking Case

Background: Triodos issued Depository Receipts for shares - non-voting certificates traded on internal platform. In 2020-2021 suspended trading due to COVID and moved to Multilateral Trading Facility of Captin.

First Ruling Spanish Supreme Court 5 May 2025: "Triodos Bank has received the first ruling by the Spanish Supreme Court in an individual case on 5 May 2025, affirming that Triodos Bank is not liable towards the involved claimant holder of depository receipts in relation to the distribution of Depository Receipts, the suspension of trading in the Depository Receipts in 2020 and 2021 and the transition to the listing on MTF of Captin." Court held bank duly informed investors about nature of product - not a deposit, capital at risk, limited liquidity.

Second and Third Rulings 6 May 2025: "Triodos Bank has received second and third ruling... affirming that Triodos Bank duly informed the involved investors prior to purchase... Consequently Supreme Court has rejected all claims from involved holders in relation to distribution, suspension and transition."

Significance: Sets important precedent for further cases. In Spain litigation remains ongoing with over 300 cases still pending as of Jan 2025 settlement. Dutch foundation Stichting Certificaathouders Triodos Bank settled, Spanish cases continue. Supreme Court says ethical branding does not create deposit guarantee.

B. Thomas v Triodos Bank NV 2017 - UK but involving Triodos Ethical Bank - Duty of Care

High Court HHJ Havelock - Bank owed duty to business customers who expressed wish to change interest on borrowings from variable to fixed to explain financial implications.

Claimants transferred borrowing to Triodos in 2006 due to its reputation for supporting businesses with strong green credentials. Bank sold them 10-year fixed rate with high break costs without explaining. Court upheld claim for mis-selling interest rate derivative despite non-advised transaction. Significant feature: bank advertised it subscribed to Business Banking Code.

Lesson for Spain: Ethical reputation increases duty of care - If bank markets as ethical and transparent, court expects higher standard of explanation under Art 2.4 Law 5/2019.

C. Cláusula Suelo - Spanish Banks Equivalent of PPI - Supreme Court Ruling on Abusive Clauses

Spain's Supreme Court issued ruling that floor clauses in mortgages were "abusive" unless comprehensible and transparent. Declared null and void. Affected all banks including cooperatives.

For ethical cooperatives like Fiare, they never used cláusula suelo - used as differentiation.

D. Supreme Court Judgment No. 489/2015 of 16 Sep - Preferred Shares - Lack of Information

First Civil Chamber - Commercialization by banks of complex financial products - claim of nullity of contract for acquisition of securities issued by Icelandic bank equivalent to preferred shares - Condemnation of bank to payment of amounts with legal interests.

Establishes MiFID information duty - Relevant to ethical banks selling CDA or social bonds - Must pass appropriateness test.

E. STS 3721/2025 - Spain Supreme Court 15 July 2025 - Transfer Pricing - Cash Pooling - Treasury System

Case involved Spanish subsidiary participating in physical cash pooling arrangement 2014-2015. Court brought clarity to treatment of centralised treasury - Applicable to cooperative group IPM - Institutional Protection Mechanism - Cash pooling between ethical cooperatives must be at arm's length, otherwise transfer pricing adjustment.

F. Amsterdam Enterprise Chamber - Triodos Investigation Refusal 2023

Chamber of Corporation in Amsterdam refused request for investigation into Triodos Bank demanded by Triodos Bank Certificate Holders Foundation and VEB. Investors alleged mismanagement.

Court rejected - Bank policy not mismanagement.

IV. Compliance Requirements for Ethical Cooperative in Spain Today

1. Prudential: Same as bank - CET1 min 4.5% + buffers, under Law 10/2014 and CRR. Despite small size, must report to Banco de España.
2. Governance: Fit and proper for Consejo Rector members - Banco de España Circular 2/2016.
3. Deposit Guarantee: Member of Fondo de Garantía de Depósitos - Covers up to €100k - Even ethical cooperative deposits guaranteed.
4. AML: Law 10/2010 - But enhanced due diligence for ethical purpose does not exempt KYC.
5. Transparency: Under Law 5/2023, Illes Balears Art 7,26,53 - Must publish social impact report.
6. IPM: If part of IPM - e.g., Grupo Caja Laboral, Cajamar - Solidarity commitments.

If you are setting up similar ethical cooperative in Spain - you need minimum capital - €1 million for credit cooperative with limited scope under Real Decreto 84/1993 Art 5 - plus Banco de España business plan approval showing ethical charter compliance.