Firstpost Explains: What are LaLiga’s financial regulations that plague Barcelona?-Sports News , Firstpost

Athletic Club and Real Madrid players during their Spanish La Liga soccer match at the San Manes stadium in Bilbao, Spain, Sunday, July 5, 2020. (AP Photo/Alvaro Barrientos)

In a largely subdued transfer window for Spanish football clubs, Rafa Mir became the third most expensive signing of the summer on Friday. The forward joined Sevilla from Wolves on a reported fee of €16 million. The two more expensive signings in LaLiga this summer have been: Rodrigo de Paul joining Atletico Madrid from Udinese for €35 million and Arnaut Danjuma to Villarreal from Bournemouth for €23.5 million.

There are a lot of moving pieces in a transfer: interested club reaching an agreement with the parent club, with the player themselves, with representatives, third parties over image rights to name just a few. And if that isn’t complicated enough, there’s also potential tussle for a player’s services with other competing clubs.

Behind the scenes, there is a lot that goes on even after all the agreements are reached. Firstpost explains how a player is officially registered to compete in a top league such as LaLiga and what are the economic controls in place to ensure clubs’ financial safety.

How are players registered in Spain’s top division?

Since 2016, clubs in Spain have been using a software called ‘LaLiga Manager’ to complete transactions for arrivals or departing players. In the past five years, over 2000 transfers have been managed through this digitised tool.

LaLiga Manager provides the club directors (and lawyers) carrying out transfers with all the documents that they must fill or upload to the system. The tool also contains all the FIFA, UEFA and LaLiga regulations that must be met, irrespective of the nature of the transfer: free agent, with the payment of a fee or through the triggering of a release clause.

If the transaction is between two Spanish clubs, then the selling club must remove the player from their lists on ‘LaLiga Manager’.

Some of the details that are mandatory to be entered include: amount paid to selling club, terms of players’ contract, agents involves and relevant taxes. The information is then ratified at the LaLiga offices for accuracy and subject to Economic Control and Squad Cost Limit (SCL) rules. The economic control is aimed at keeping spending on sporting personnel within limits.

What is the Economic Control?

The economic controls and squad cost limit rule prevented Barcelona from handing Lionel Messi a new contract since the club’s salaries-to-turnover ratio was 105%. Amid debt of €1.35 billion, Barcelona were reportedly unable to register new signings Memphis Depay, Sergio Aguero and Eric Garcia. That changed with Gerard Pique taking a pay cut and more of the senior players — Sergio Busquets, Jordi Alba and Sergi Roberto — are slated to forego wages as well.

The economic control is a regulatory framework that was introduced in 2013 with the objective of keeping clubs afloat and thus keeping the competition (leagues) sustainable. The move came on the back of multiple financial ireegularities which affected clubs such as Deportivo La Coruña, Racing Santander, Valencia, Real Zaragoza, Real Mallorca, Albacete, Real Betis.

What’s the difference between Economic Control and UEFA’s Financial Fair Play (FFP)?

The fundamental difference is in the application of rules. Where FFP acts later against errant clubs for breaching regulations, Spain’s Economic Control acts before things go out of hand (to a degree). The clubs know how much they can spend in advance, making it easier to stay within the limits and preventing the creation of unsustainable debt.

What does Squad Cost Limit (SCL) mean?

LaLiga – Economic Control and Squad Cost Limit

It is the amount that each club can spend on their squad. The definition of squad extends to registered players, non-registered players and coaches (head coach, assistant coach, fitness coach and others). And as far as payments are concerned, it includes aspects such as salaries, variable payments, image rights payments, agent fees, amortisation of transfer rights, social security contributions, compensations, license fees etc.

Formula to calculate SCL: budgeted non-sporting expenses are subtracted from the budgeted revenues with debt repayments being factored in.

For the 2020/21 season, Real Madrid were eligible to spend €468 million, while that for Barcelona stood at €382 million and €252 million for eventual champions Atletico Madrid.

What happens if a club goes beyond its allowed SCL?

COVID-19 has resulted in drastic reduction in revenues for football clubs across Europe. Keeping that in mind, the expenses have largely remained the same if not increased due to safety. In situations where a team exceeds the SCL, clubs are allowed to spend no more than 25% of a cost that has been reduced beforehand.

Called the “1/4 rule,” two exceptions were introduced in 2020/21 transfer window: if a club above the limit achieves a capital gain from a transfer then 25% of that capital gain will be added to the “1/4” calculation. Additionally, if a saving is made through a player who represents more than 5% of the SCL then a “1/2” rule will be applied instead of a “1/4” rule. In other words, 50% of that saving can be spent.