Spanish Public Finance: ICO and Bank of Spain Roles & Funding

Official Credit Institute (ICO) — Role & Funding

What is the ICO: The only remaining public bank is the Official Credit Institute (ICO), a public company.

How is it funded:

• Income from its assets.
• Contributions from the State or other public bodies, companies, or associations.
• Raising funds in domestic or foreign markets through the issuance and placement of certificates, notes, bonds, debentures, and any other securities that imply an admission of debt.

How it cannot be financed: The Treaty on European Union establishes that the ICO receives the same treatment as private credit institutions.

ICO Functions

• Contribute to mitigating the effects of severe economic crises, natural disasters, or similar situations, according to instructions from the Council of Ministers or the Executive Committee for Economic Affairs.
• Act as an instrument to implement specific economic policy measures by granting medium- and long-term loans.
• Formalize, manage, and administer funds, grants, loans, guarantees, etc.
• Take equity stakes in financial firms.
• Provide financial advice to public and private entities in matters related to the Institute's purposes.

Bank of Spain — Role and Central Functions

What is it: The Bank of Spain is a legal public entity with legal personality and full public and private capacity.

Functions as the country's central bank:

Functions of the Bank of Spain (national and autonomous) include:

• Hold and manage foreign exchange reserves and precious metals not transferred to the ECB.
• Promote the smooth functioning and stability of the financial system and the national payment systems.
• Monitor the solvency and compliance with specific regulations of credit institutions and other entities whose financial market supervision has been assigned to it.
• Put coins into circulation and carry out other functions assigned to it.
• Develop and publish economic indicators and statistics related to its duties and assist the ECB in compiling statistical information necessary for the European System of Central Banks.
• Provide treasury services and act as financial agent for the public debt.
• Advise the government and prepare reports and studies.
• Control monetary policy.

Two monetary policy tools: interest rate and reserve ratio

Discuss two tools of monetary policy: the interest rate and the minimum reserve ratio.

Can the Bank of Spain provide services to the Treasury?

Answer: Yes. The Bank of Spain can provide services to the public Treasury, such as maintaining accounts and processing receipts and payments. However, it cannot finance the Treasury directly or assume the Treasury's debt.