Foreign institutions in Spain and the Deposit Guarantee Scheme


Opening an account in a foreign bank is common nowadays. Many credit institutions whose head offices are abroad operate in Spain. They can act under the form of a subsidiary, a branch in Spain or under the freedom to provide services.

Subsidiaries are business entities incorporated in Spain which are authorised to operate as Spanish credit institutions to all effects and purposes, including guaranteeing deposits under the Deposit Guarantee Scheme for Credit Institutions (see the following Box).

  • Branch in Spain of a foreign credit institution. A foreign bank which operates in Spain though a permanent establishment.
  • Freedom to provide services. A foreign bank which provides services in Spain from its head office abroad, without an establishment in Spain.

According to data from the Banco de España’s credit institutions register, as at 31 December 2018, 673 foreign credit institutions were operating in Spain under the subsidiary or freedom to provide services regimes.

However, in these cases, the question arises whether cash deposits entrusted to these foreign credit institutions are guaranteed if they become insolvent in the same manner as when they are entrusted to Spanish credit institutions.

Please note that Spanish credit institutions are legally required to contribute to the Deposit Guarantee Scheme (DGS) for Credit Institutions in order to guarantee, in the event of insolvency or similar situations, that customers who have deposits in savings accounts, current accounts and fixed-term deposits are reimbursed (securities and financial instruments deposited at the bank are also guaranteed). The cash deposit amount that is guaranteed is limited to €100,000 per account holder, regardless of the number and type of deposits held at each bank.

The answer to that question will depend on whether the entity is a branch of an EU Member State or of a non-EU Member State.

In the case of branches located in Spain that belong to authorised credit institutions in other EU Member States, any money deposited in them by customers is guaranteed by the Deposit Guarantee Scheme of the corresponding credit institution’s home country. In accordance with EU lawAbre en ventana nueva, such Deposit Guarantee Scheme must provide the same coverage as the Spanish DGS.

The branches of non-EU Member State credit institutions operating in Spain must contribute to the Spanish DGS unless such institutions provide a level of protection to depositors that is equal to or higher than our DGS. If such coverage is lower than they must contribute to the DGS to cover the difference in coverage.

What happens if a foreign credit institution is operating without an establishment in Spain?  Here we must once again distinguish between institutions that are authorised in other EU countries and in non-EU credit institutions.

In the case of EU institutions, cash deposited by customers is guaranteed by the Deposit Guarantee Scheme of the home country of the credit institution in question, and the coverage it provides must be equal to that provided by the Spanish DGS.

Non-EU institutions may only operate in Spain without an establishment subject to express authorisation by the Banco de España, which will determine which activities they may engage in. Only three non-EU banks currently operate under this regime in Spain, although none of them is authorised to receive deposits from the public. If in the future a non-EU bank should plan to take deposits in Spain without having a permanent establishment, the Banco de España’s authorisation would be conditional upon proof being provided that such deposits have the same protection as in the home country and that the conditions set for deposit coverage in Spain were met.

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