Spain approves the Legislative Proposal that implements a regulatory sandbox

By José Luis Lorente Howell, Adrian Calvo

02-2020

On February 18, the Spanish Council of Ministers approved the legislative proposal on measures for the digital transformation of the financial sector (the "Legislative Proposal") and has passed it on to the Parliament for its final approval. 

The Legislative Proposal foresees the implementation of a regulatory sandbox in Spain. The sandbox is a controlled space in which projects consisting of business based on financial innovation may be tested with real clients, under the supervision of one of the financial sector Supervisors (Bank of Spain, CNMV and DGSFP), depending on the specific sector in which each project is to be implemented - banking, financial markets or insurance. 

In particular, the Legislative Proposal contemplates the sandbox to be governed by a law-protocol scheme, in which the basic operating features will be regulated by the Legislative Proposal, and the specific terms in which each project is carried out will be agreed in an ad hoc protocol between the relevant Supervisor and the project promoter. In addition, the Legislative Proposal allows projects, once they have completed their journey through the sandbox, to start providing the regulated activity through a simplified authorisation process; all provided that the Supervisors can determine that, as a result of their experience in the sandbox, they have acquired sufficient knowledge to ensure the viability of the project in terms of suitability and security for clients and markets.

Projects seeking access to the sandbox will have to apply to the General and International Finance Secretariat of the Treasury and, in order to be eligible to participate in the sandbox, they must (i) demonstrate a high degree of technology-based financial innovation; (ii) be sufficiently mature to be tested and; (iii) report improvements in regulatory compliance, customer protection or increased efficiency over markets and in the quality of financial services provision.

Finally, it should be noted that, on average, the parliamentary ratification procedure of a legislative proposal can take up to five months. However, according to the latest government statements, the sandbox aims to be fully operational and admitting its first projects in 2020.

If you have any questions regarding the above, please get in touch with one of the members of our international Payments team.

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