Maximum interest rates for local public debt 2026: what regional governments and municipalities can pay

Key data

Sub-state public administrations have a ceiling on their debt costs: the Treasury updates it every month and has just published the table in force for October 2026. The Resolution of 9 October 2026 updates annex 1 of the Resolution of 4 July 2017, which established the principle of financial prudence applicable to borrowing operations and derivatives of regional governments and local entities.

The objective is clear: no regional or local administration can borrow at a cost higher than what the Treasury considers prudent at each moment in the market. If an entity contracts a loan or issues debt above these limits, it violates financial stability regulations.

What does this regulation establish?

The resolution updates the table of maximum rates that regional governments and local entities must respect when contracting borrowing operations or financial derivatives. This is a mandatory monthly update of annex 1 of the 2017 framework regulation.

The table distinguishes two main blocks: fixed-rate operations and variable-rate operations referenced to euribor.

Maximum annual fixed rates by average life of the operation

Intermediate rates scale progressively between both extremes depending on the term of the operation. The longer the term, the higher the maximum rate allowed, which reflects the risk and liquidity premium typical in debt markets.

Maximum spreads over euribor for variable-rate operations

For operations referenced to variable rates, the resolution publishes maximum spreads over the following references:

• 1-month euribor
• 3-month euribor
• 6-month euribor
• 12-month euribor

Special minimum protection clause

The resolution includes a relevant clause: if the maximum cost resulting from applying the table were lower than the reference euribor, the operation can be formalized at euribor plus 20 basis points (0.20%), provided the operation is cancellable without commissions. This safeguard prevents the regulation from blocking operations in high-rate environments.

Mandatory use

Administrations that do not have their own valuation tools are required to use this table as a reference to validate any borrowing operation or derivative. It is not a recommendation: it is a regulatory limit.

Economic and operational impact

This monthly update has direct consequences on the financing capacity of sub-state administrations:

• Capped debt cost: No new operation can exceed the published rates. If the market offers worse conditions, the administration cannot contract that operation under the umbrella of financial prudence.
• Reference for bank negotiation: Financial managers of regional governments and municipalities use this table as a ceiling in their negotiations with financial entities. A bank offering a rate above the legal maximum is automatically ruled out.
• Impact on long-term operations: The maximum rate of 4.65% for 30-year operations is the most relevant limit for large investment projects financed with long-term debt (infrastructure, equipment, etc.).
• Monthly update: Limits change every month. An operation that was viable in September may not be in October if the Treasury has adjusted rates downward, and vice versa.
• Euribor + 20 bp clause: In high-rate environments, this clause may be the only way to formalize variable-rate operations without violating the regulation.

Who does it affect?

• Regional governments that contract loans, credits or issue debt in capital markets.
• Municipalities and provincial councils that formalize short, medium or long-term borrowing operations.
• Local entities (associations, consortiums, local autonomous bodies) that access external financing.
• Financial managers and treasurers of public administrations responsible for validating and approving debt operations.
• Auditors and financial advisors who must certify compliance with the principle of financial prudence before formalizing any operation.
• Financial entities (banks, savings banks) that offer financing to sub-state public administrations, since their offers must adjust to these limits to be acceptable.

Practical example

A medium-sized municipality needs to finance the construction of a new sports center and decides to contract a loan for 20 years with a bank. The bank offers a fixed rate of 4.80% per year.

Before signing, the municipal auditor consults the table published by the Treasury on 15 October 2026. The maximum fixed rate allowed for an average life of 20 years is below 4.65% (the absolute ceiling is for 30 years; at 20 years the limit is lower). The bank's offer of 4.80% exceeds the legal maximum.

The municipality cannot accept that offer without violating the principle of financial prudence. It has two options: negotiate with the bank to adjust the rate to the maximum allowed, or seek another entity that offers conditions within the legal limit. If the bank does not agree, the operation cannot be formalized on those terms.

If, instead, the municipality opted for a variable-rate operation referenced to the 6-month euribor, it must verify that the spread offered does not exceed the maximum published in the table for that reference. And if the reference euribor exceeds the resulting maximum cost, it could use the special clause and formalize the operation at euribor plus 20 basis points, provided it is cancellable without penalty.

What should administrations do now?

1. Download and review the updated table: Access the Resolution of 9 October 2026 and extract the maximum rates applicable to each term you plan to contract.
2. Validate all pending bank offers: Any offer received before 15 October must be revalidated against the new table. Rates change monthly and an acceptable offer in September may violate October limits.
3. Verify variable-rate operations: Check that the spreads over euribor offered do not exceed the maximums published for each reference (1, 3, 6 and 12 months).
4. Apply the special clause if applicable: If the resulting maximum cost is lower than the reference euribor, evaluate whether the operation can be formalized at euribor plus 20 basis points with cancellation without commissions.
5. Document compliance: The auditor or financial manager must keep written record that the operation complies with the limits of the principle of financial prudence in force on the date of formalization.
6. Schedule monthly review: Establish an internal process to review the Treasury table each month, especially if you have operations in negotiation phase or about to be formalized.

Official source

Consult complete regulation in official source

Notice: This article is for informational purposes only and does not constitute legal advice. For specific decisions, consult a qualified professional. Source: https://www.boe.es/diario_boe/txt.php?id=BOE-A-2026-21453