ENTREVISTA AL PRESIDENTE

Regulatory Compliance

An ethical commitment and a cutting-edge institutional framework

The achievement of business objectives must be compatible not only with regulatory compliance, but also with the development of national and international best practices and standards. Regulatory compliance is not just a legal obligation for Bankinter, it is an ethical commitment to society.

The growing importance of regulatory compliance has been underlined by the entry into force, as a result of the economic and financial crisis, of several highly complex regulations and the launch of a new supervisory architecture, obliging the bank to increase its resources.

The purpose of the Compliance function is to assess and provide guidelines for the lines of business that help define its strategy, ensuring compliance with applicable legislation at all times. With this in mind, all areas of the Compliance function spare no efforts in enhancing the training activities of its commercial staff.

Internal organisation

Regulatory compliance duties are integrated in Bankinter through an internal institutional framework that is structured around the Corporate Control and Compliance department, which includes the areas in charge of four units that operate as a second level of control:

Risk Control and Internal Validation
Financial Control and Analysis
Regulatory Compliance
Prevention of Money Laundering and the Financing of Terrorism

This organisational structure allows the information systems of the second level control areas to be standardised and provides them with the necessary independence to carry out their duties, in line with best practices in this field. The work started in 2021 to implement the new risk measurement methodology for regulatory compliance and in the prevention of money laundering and the financing of terrorism was completed in 2022 and implemented as a common tool for all areas of management.

The culture of risk control is deeply rooted in the organisation and driven by the strong involvement of the board and senior management. It is transmitted to the business units with agility and efficiency through this corporate structure to ensure compliance with the rules and prevent undesired behaviour.

Basic areas

Under this regulatory and institutional framework, the bank developed the basic areas of the compliance function in 2022 through the following units:

Control and advice on banking transparency and products, investment services, market abuse, Internal Code of Conduct and conflicts of interest. Bankinter has implemented a methodology based on the risk approach that enables the risk of default in each area of activity to be assessed in relation to the provision of investment and banking services.
Prevention of money laundering and the financing of terrorism. In 2022, the risk management and control framework, as well as centralised monitoring, were further strengthened.
Risk Control and Internal Validation. It is responsible for controlling credit, operational, technological, market and institutional risks.
Financial Control and Analysis. It reviews the general framework of internal financial control and outsourced services.

The Corporate Control and Compliance division has global responsibilities and supports the Group's governing bodies. Its head acts under the supervision of the chief risk officer while reporting hierarchically to the risk and compliance committee of Bankinter's board of directors.

This organisational structure enables the Bank to adequately manage the risk of failing to comply with regulations, which also entails significant reputational risk, with a potentially adverse impact on relations with customers, markets, employees and the authorities. Non-compliance may result in sanctions, damages or cancellation of contracts, with consequent damage to the image of the Group.

In particular, the Corporate Control and Compliance division participates in the following bodies of the Group:

The regulatory compliance committee. This is the senior management body that monitors the bank’s compliance policies according to the charter of the Regulatory Compliance function. The committee executes the policies in relation to the regulatory and regulatory compliance matters established by the board of directors' risk and compliance committee.
The products and operational risk committee. This committee approves the launch, modification, monitoring and cancellation of products and services offered to customers. It is the body to which information on the entity's operating and operational risk is reported. In 2022, the review of the current portfolio of products and services offered to customers was completed, ensuring that they have sufficient guarantees of quality and control and that the target audience is the right one. In addition, the new methodology for monitoring products and services throughout their life cycle was approved.
Body for internal control. This body is responsible for establishing and ensuring compliance with policies and procedures for preventing money laundering and the financing of terrorism, in accordance with Law 10/2010 and other applicable regulations, which constitute Bankinter Group's prevention framework. This body is required to understand the Group's risks in this area and to ensure that the necessary measures are taken to mitigate them.

In addition, in support of the board's supervisory duties, other specialised committees have been set up by senior management and in which the Corporate Compliance and Control division participates to ensure effective and homogeneous risk management, such as the crime prevention and professional ethics committee. It is also involved in the corporate risk map monitoring committee, the credit risk models committee, the data management operations committee, the coordination of technological risks committee, the information security and business continuity committee, and the outsourcing committee.

Early detection of changes

Bankinter Group has assigned the competencies of identifying and reporting regulatory changes to the Regulatory area, which reports to the Office of the General Secretary. The Regulatory area facilitates early detection of the potential impacts of regulatory changes, reducing their risks. Every year it prepares a three-year regulatory map that serves as the basis for the regulatory strategy.

In 2022, a cross-cutting regulatory change management was carried out, with particular focus on the various regulatory projects that required the adaptation of the Group's activities or processes. These include the regulations derived from the EU's legislative package on sustainable finance.; the new regulation on covered bonds derived from Royal Decree-Law 24/2021; and the reporting obligations derived from Banco de España's Circular 4/2021 on model reserved statements relating to market conduct, transparency and customer protection, and on the register of complaints.

The implications of the termination or loss of representativeness of certain LIBOR terms and currencies was another priority. The Regulatory area advised on the adaptation work that was required, and on the analysis and decisions to be taken in order to mitigate its impact and carry out an orderly transition.

The entry into force of consumer protection regulations, such as those introduced by Law 4/2022, on the protection of consumers and users in situations of social and economic vulnerability, required certain adaptations that enhance customer protection.

Other significant regulatory changes included the Central Securities Depositories Regulation, in particular on the securities settlement discipline regime, and the amendment of the Packaged Retail Investment Products (PRIIPs) Regulation.

Sustainability and retail loans in 2023

In 2023, numerous regulations are expected to be developed, at European and national level, which require special attention and monitoring:

The EU's legislative package on sustainable finance. Level 2 implementations of the regulatory developments of the Disclosure Regulation and the Taxonomy Regulation will be initiated. In addition, the European green bond regulation and the directive on corporate sustainability due diligence are expected by the end of the year. Bankinter Group fully supports this legislative package, which will strengthen the resilience of the European financial sector.
Bankinter Group fully supports this legislative package, which will strengthen the resilience of the European financial sector. It aims to ensure that citizens can invest with confidence and security, to increase their participation in the process and to improve market performance.
The EC's legislative proposal on access to financial data (securities accounts, pension schemes, deposits and other use cases). The EU regulation on instant payments and the EC's proposal on the revision of the PSD2 payments directive, which will include provisions on fraud, possible entry of new players and privacy and consumer protection, are also expected to be adopted.
The review of the Consumer Credit Directive will be completed in the first part of the year, and the proposal on the Mortgage Credit Directive will be considered.
Other regulatory requirements to be taken into account in 2023 include the recently published Regulation 2022/2554 on the Digital Operational Resilience of the Financial Sector (DORA), which has a major impact on the sector; Directive 2022/2555 on measures to ensure a high common level of cybersecurity (NIS2); and Directive 2022/2557 on the resilience of critical entities.
Proposed regulations on markets in crypto-assets and on artificial intelligence and results of the implementation of the Pilot Regime Regulation on market infrastructures based on distributed ledger technology (DLT).
The various developments in the EU package on the prevention of money laundering and the financing of terrorism, with the creation of the new European authority, the amendments to the regulation on data to accompany transfers of funds, and the regulation on the fight against money laundering and the financing of terrorism containing directly applicable rules, as well as the sixth directive on the subject.
At the national level, it is foreseeable that the law transposing Directive 2019/882 on accessibility requirements for products and services and the royal decree regulating the basic conditions for accessibility and non-discrimination of persons with disabilities for access to and use of goods and services available to the public will be passed. Further developments are also expected on the future law on customer service and on the creation of the Independent Administrative Authority for the Financial Customer Ombudsman, whose parliamentary procedure started at the end of 2022.