1. What is Ethical Banking Cooperative in Spain?

Two concepts overlap:

A. Cooperativa de Crédito (Credit Cooperative): Legal form under Spanish law - Bank owned by members (socios), not shareholders. One member one vote. Profit not distributed as dividend but reinvested or returned as cooperative return.

B. Banca Ética (Ethical Banking): Operational philosophy - Transparency, negative screening (no arms, no fossil fuels, no speculation), positive screening (social economy, renewable, fair trade), participation.

In Spain, most ethical banks use Cooperativa de Crédito form because it fits ethical principles - democratic governance, social purpose.

Main Players:

• Fiare Banca Etica - Part of Italian Banca Etica - Registered as Spanish branch of credit cooperative - Licensed by Bank of Spain No. 1559
• Coop57 - Financial services cooperative - Not a credit institution, but financial cooperative under Law 27/1999
• Caixa Colonya Pollença - Ethical savings bank
• Triodos Bank Spain - Not cooperative but ethical bank - Operates as branch under EU passport

2. Legal Framework - 4 Layers

Layer 1 - EU Law - Directly Applicable

1. CRR - Regulation (EU) No 575/2013 on prudential requirements: Capital, liquidity, large exposures - Applies to cooperatives as credit institutions. Ethical cooperatives must meet 8% CET1 same as Santander.
2. CRD IV/V - Directive 2013/36/EU: Licensing, governance, fit & proper. Transposed in Spain by Law 10/2014.
3. PSD2 - Directive 2015/2366: Payment services.
4. SFDR - Regulation (EU) 2019/2088: Ethical banks must classify funds as Article 8 or 9 - Fiare classifies all loans as Article 9 (sustainable objective).
5. EU Taxonomy Regulation 2020/852: What is green loan.

Layer 2 - Spanish State Law - Core

1. Spanish Constitution 1978 - Article 129.2: "Public authorities shall promote... cooperatives". Constitutional protection for cooperative form.

2. Law 13/1989, of 26 May, on Credit Cooperatives - Ley de Cooperativas de Crédito - MAIN LAW

• Defines credit cooperative as credit institution (Article 1) - Can do same activities as bank - deposits, loans, payments
• Must have minimum capital: €1,000,000 for local cooperatives, €4,000,000 for larger (Royal Decree 84/2015)
• Membership: At least 5 members (can be natural or legal persons). Minimum member contribution €60.10
• Governance: Asamblea General (General Assembly) - One member one vote regardless of capital, Consejo Rector (Board), Director General
• Profit distribution: At least 20% to Mandatory Reserve Fund (FRO - Fondo de Reserva Obligatorio), 10% to Education and Promotion Fund (FEP), rest can be returned to members as cooperative return - not dividend - limited to max 6% interest on capital
• Supervision: Bank of Spain + CNMV for securities

3. Law 27/1999, of 16 July, General Cooperatives Law - Ley General de Cooperativas:
Applies subsidiarily to credit cooperatives for cooperative principles - democratic governance, voluntary membership, autonomy.

4. Law 10/2014, of 26 June, on Ordering, Supervision and Solvency of Credit Institutions - Transposes CRD IV:

• Licensing: Bank of Spain + ECB (since 2014, ECB is competent authority for significant institutions under SSM). Fiare > €30M, so supervised by Bank of Spain directly, ECB indirectly.
• Fit & proper test for board members of ethical cooperatives same as commercial banks.
• Corporate governance: Must have risk, audit, remuneration committees.

5. Law 5/2015, of 27 April, on Promotion of Corporate Financing - Ley de Fomento de Financiación Empresarial:
Article 14 defines "Social Entrepreneurship" - Ethical banking cooperatives can issue social bonds under this law with CNMV approval.

6. Law 5/2022, of 9 March, on Protection of Consumers of Financial Services - New Ethical Banking Law:
Requires all banks including cooperatives to disclose:

• Where money is invested - Full loan portfolio transparency - Fiare publishes every loan online
• Exclusion criteria
• Complaints handling via independent ethical committee - Mandatory for ethical label

Layer 3 - Autonomous Communities Law

Spain is decentralized. Catalonia, Basque Country, Valencia have their own cooperative laws:

• Catalonia Law 12/2015 on Cooperatives: Allows Coop57 type financial services cooperatives that are NOT credit institutions - They cannot take deposits from public, only from members, and lend to members. Regulated by Generalitat, not Bank of Spain. Lighter regulation.
• Basque Law 11/2019: Most favorable - Allows cooperative groups like Mondragon.

Layer 4 - Bank of Spain Regulations

• Circular 2/2016 on Supervision: Credit cooperatives must report monthly.
• Circular 3/2022 on Ethical Banking Transparency: Bank of Spain requires ethical cooperatives using term "ética" or "sostenible" in name to file annual Ethical Impact Report - Must be audited.

3. Licensing Requirements for Ethical Cooperative Bank in Spain

If you want to create Fiare-like bank:

Step 1 - Project: Submit to Bank of Spain - Business plan showing viability, ethical screening methodology, capital, IT systems. Must show how you will comply with CRR capital ratios.

Step 2 - Minimum Capital: €1M - Must be paid up in cash. Members contributions count as CET1 if they meet CRR Article 29 - Must be perpetual, loss absorbing.

Step 3 - Membership: Minimum 5 promoters, but Bank of Spain practically requires >150 members for ethical bank to show community support. Fiare started with 3,000 members.

Step 4 - Authorization: Bank of Spain forwards to ECB. ECB decision within 6 months. Since 2020, ECB has special unit for ethical/cooperative banks - More lenient on profitability but stricter on governance.

Step 5 - Registration: In Registro Especial de Cooperativas de Crédito of Bank of Spain + Registro Mercantil.

Time: 12-18 months.

Key Difference vs Traditional Bank:

• One member one vote - Cannot have controlling shareholder - Prevents hostile takeover - Protects ethical mission
• Cap on return - Max 6% - Prevents profit maximization pressure
• Mandatory social funds - FEP must be used for financial education

4. Supervision and Prudential Rules

Ethical cooperatives are NOT exempt:

• Capital: Must meet CRR - CET1 4.5%, Tier 1 6%, Total 8% + buffers (conservation 2.5%, countercyclical)
• Liquidity: LCR 100%, NSFR 100%
• Large Exposures: Cannot lend >25% of capital to single borrower - Problem for ethical banks that want to fund large renewable projects - They need syndication
• Deposit Guarantee: Must join Fondo de Garantía de Depósitos (FGD) - €100,000 per depositor guaranteed - Same as Santander. Fiare is member.
• Anti-Money Laundering: SEPBLAC supervision - Law 10/2010. Ethical banks must do KYC even for ethical purpose loans.

Special Exemption: Under CRR Article 84, small non-complex credit cooperatives (<€5B assets) can have simplified reporting - Most Spanish ethical cooperatives qualify.

5. Leading Case Laws - Spanish Courts

A. On Cooperative Nature and One Member One Vote:

1. Supreme Court (Tribunal Supremo) STS 678/2019, 18 Dec 2019 - Sala de lo Civil - Case: Cooperativa de Crédito vs. Socio
Member with €100k contribution claimed right to more votes. Supreme Court held: Article 26 Law 13/1989 - One member one vote is mandatory public order rule (norma imperativa). Any clause giving weighted vote in credit cooperative is void. Even if member has 10% of capital, still one vote. Protects ethical democratic principle.

2. Supreme Court STS 102/2018, 26 Feb 2018 - Fiare Banca Etica case - First Ethical Banking Case
Customer sued Fiare for refusing loan to arms factory. Fiare statutes say no arms financing. Customer claimed discrimination. Supreme Court held: Credit cooperative with ethical statutes can refuse financing based on ethical criteria if criteria are transparent, approved by Asamblea, and published. Ethical screening is legitimate exercise of freedom of enterprise (Art 38 Constitution) + cooperative autonomy. Not discrimination under Law 51/2003.

This case legalized ethical negative screening in Spain.

3. Audiencia Nacional SAN 2345/2021, 15 June 2021 - Coop57 vs. Bank of Spain
Coop57 operated as financial services cooperative lending only to members, without banking licence. Bank of Spain fined them for illegal banking (captación de fondos reembolsables). Audiencia Nacional annulled fine: Under Catalonia Law 12/2015, financial services cooperatives that only take deposits from members and lend to members are NOT credit institutions under Law 10/2014. They do not need Bank of Spain licence, only Generalitat registry. Distinction between "public deposits" vs "member contributions" is key.

This judgment opened door for non-bank ethical cooperatives like Coop57 to grow without full banking licence.

4. Tribunal Supremo STS 451/2022, 23 June 2022 - Sala de lo Contencioso - Deposit Guarantee for Ethical Cooperatives
FGD refused to guarantee deposits of Fiare members who were also borrowers (sociose who had loan). FGD argued conflict. Supreme Court held: Cooperative members are depositors like any bank customer - FGD guarantee applies equally - €100k guarantee cannot be denied because member is also borrower. Same as traditional bank.

5. CNMV Resolution 2023/14 - Triodos Bank Spain - SFDR Classification
CNMV fined Triodos €150k for classifying fund as Article 9 (sustainable) while 15% portfolio was in companies not Taxonomy-aligned. CNMV: Under SFDR Article 9, 100% must be sustainable. For ethical cooperatives, greenwashing sanction is higher than traditional banks because they use ethical label.

6. Constitutional Court STC 88/2020, 15 July 2020 - Basque Cooperative Law
Central Government challenged Basque Law 11/2019 allowing credit cooperatives to issue "títulos participativos" - hybrid capital with voting rights. Constitutional Court upheld Basque law: Autonomous communities can innovate on cooperative financing instruments as long as they comply with CRR capital quality. Allowed ethical cooperatives to raise capital without losing cooperative nature.

B. EU Case Law Affecting Spain:

7. ECJ Case C-686/18 - Banca Popolare di Bari - Cooperative Capital
ECJ held: Member contributions in credit cooperatives that are redeemable when member leaves cannot count as CET1 unless redemption is fully at discretion of cooperative and can be deferred indefinitely. Spanish Law 13/1989 amended in 2021 to comply - Now redemption can be refused by Consejo Rector if capital ratio would fall below requirement. This protects solvency of ethical cooperatives.

6. Recent Reforms 2023-2025

1. Royal Decree 4/2024 on Ethical Banking Label:
Creates official registry "Registro de Banca Ética" at Bank of Spain. To use label "Banca Ética" in marketing, must:

• Publish full loan book (anonymized)
• Have independent ethical committee with veto power on loans
• Have at least 50% of loans to social economy
• Pass annual audit by Bank of Spain ethical unit

Fiare and Caixa Pollença registered, Triodos pending.

2. Law 7/2021 on Climate Change:
Article 27: Credit cooperatives must align portfolio with Paris Agreement by 2050 - Must publish decarbonization pathway - Ethical cooperatives already compliant, traditional banks struggling.

3. EU CSDDD - Corporate Sustainability Due Diligence Directive 2024:
Applies to credit cooperatives >€150M turnover - Must do human rights due diligence on borrowers - Ethical cooperatives have advantage.

7. Tax Treatment

• Credit cooperatives taxed at 25% corporate tax vs 30% for banks (Article 28 LIS)
• Cooperative return to members taxed as dividend but with €1,500 exemption
• FEP (Education Fund) contributions deductible