Fintech Market Overview

Demo

Law 5/2015 governs crowdfunding and crowd-lending platforms, and the provision of their services. An authorisation from the CNMV (with BoS involvement) is mandatory to carry out these activities. Unlike other Spanish financial regulations based on European directives, this legislation is a domestic one, yet it needs to be updated in accordance with the EU Regulation on European Crowdfunding Service Providers (ECSP). This Regulation was framed as part of the European Commission's fintech action plan, along with the mid-term review of the 2015 capital markets union action plan. It came into effect on 10 November 2021. A uniform set of rules for providing investment-based and lending-based crowdfunding services related to business financing is laid down in the Regulation. Platforms can apply for an EU passport based on a single set of rules, which makes it easier for them to offer their services across the EU with a single license. As a result of the new rules, companies will have more access to this innovative form of financing, which will offer them a viable alternative to bank financing. Crowdfunding platforms will benefit from an enhanced investor protection framework based on: (1) clear rules on information disclosures for project owners and crowdfunding platforms; (2) rules on governance and risk management for crowdfunding platforms; and (3) strong and harmonised supervisory powers for national authorities overseeing the functioning of crowdfunding platforms. The CNMV has established a simplified procedure for platforms that are already authorised in Spain so as to continue providing these services and to adapt to the content of the Regulation, which may be in force until 10 November 2022.¹

The Spanish government has passed Law 7/2020 of 13 November 2020 to promote the digital transformation of the financial system. This law includes a number of measures, as well as creating a sandbox for carefully monitored trials. These experiments are meant to bring about technological progress in finance with applications, processes, products or business models that benefit users of financial services, encourage regulatory compliance, and boost the efficiency of institutions or markets, and potentially enhance public functions in finance.¹

Law 35/2003 on collective investment schemes and Law 22/2014 on venture capital and other closed-ended investment schemes, as well as management companies for these schemes, govern collective investment vehicles. Fintech collective investment vehicles are not governed by a specific law.¹

In contrast to the remainder of fintech, crowdfunding and crowd-lending platforms fall under Law 5/2015 and the ECSP in Spain. When a fintech organization participates in a credit deal with a consumer, Spanish consumer credit laws apply. Loans and financings can be allocated through an assignment agreement and it is commonplace for entire debt portfolios to be transferred. To trade such loans and financings, they must first be converted into a security which is assigned to a special purpose vehicle (SPV). Consequently, the SPV can issue securities backed by the credits granted under the loans.¹

Law 5/2015 amended the Spanish legal regime on securitisation, which is also subject to Regulation (EU) 2017/2402 (the Securitisation Regulation). This was recently updated by Regulation (EU) 2021/557 of 31 March 2021, with the purpose of promoting economic recovery during the Covid-19 crisis. In Spain, when transferring assets to a securitisation fund, certain conditions must be met:

1. the transferor and, as the case may be, the issuer of the securities assigned to a securitisation fund must have audited their annual accounts for the two financial years prior to the incorporation of the fund, except in certain cases;
2. the transferor must disclose in its annual reports the current and future assignment of credit rights that impact each year;
3. the assignment of the assets to the fund should be formalised in a contract; and
4. the management company of the securitisation fund should submit a document to the CNMV for each asset assignment containing certain information on the assets. ¹

The recent approval of the sandbox provides new entities with an excellent opportunity to access the financial system. The fintech market will pay close attention to the results of the projects that are being tested.¹

Banking in Spain

Fintech in Spain

Fintech in other countries

Notes

1. https://thelawreviews.co.uk/title/the-financial-technology-law-review/spain