title: Opinion of the European Central Bank of 1 October 2009 on the issuance of special government bonds to credit institutions (CON/2009/78)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 1 October 2009 on the issuance of special government bonds to credit institutions (

text: ) Introduction and legal basis

text: On 15 September 2009 the European Central Bank (ECB) received a request from the Cypriot Ministry of Finance for an opinion on (i) a draft law on the issuance of special government bonds to credit institutions (hereinafter the ‘draft law’); and (ii) a draft decree of the Minister of Finance elaborating on and implementing the draft law (hereinafter the ‘draft decree’). The ECB’s competence to deliver an opinion is based on Article 105(4) of the Treaty establishing the European Community and on the third and sixth indents of

text: on the consultation of the European Central Bank by national authorities regarding draft legislative provisions , as the draft law and draft decree relate to the Central Bank of Cyprus (CBC) and to rules applicable to financial institutions insofar as they materially influence the stability of financial institutions and markets. In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.

text: 1. Purpose and main features of the draft law and draft decree

text: 1.1 Purpose The stated purpose of the draft law and draft decree is to authorise and regulate the proposed issuance by the Minister of Finance of special government bonds to be used as collateral by eligible credit institutions ‘for obtaining liquidity from the European Central Bank and/or the interbank market’ , with the aim of enhancing market liquidity and reinforcing the national economy against the adverse effects of the global financial crisis . In particular, eligible credit institutions to which the special government bonds have been allocated are to come under an obligation to use the proceeds of the liquidity raised for the granting of credit to domestic households and small and

text: 1 OJ L 189, 3.7.1998, p. 42.

text: 2 Article 5(4) of the draft decree provides that ‘The credit institutions that are allocated the special government bonds shall use the said bonds only as collateral for obtaining liquidity from the European Central Bank and/or the interbank market.’.

text: 3 Draft law,

text: Article 4

text: . medium enterprises (SMEs) , thereby indirectly contributing to a reduction of the pressure on lending interest rates. In order to safeguard the proper implementation of the terms and conditions governing the issuance and use of the special government bonds, the draft law and draft decree foresee (i) the establishment of a special, six-member Committee, entrusted with monitoring tasks ; and (ii) the imposition of sanctions in cases of non-compliance by the beneficiaries of the special government bonds with the terms and conditions of their issuance and use . 1.2 Main features The draft law foresees the issuance and contractual allocation (effectively, the ‘lending’) to eligible credit institutions of zero coupon special government bonds, with a value of up to EUR 3 billion and a maturity of up to three years . The offering of bonds to eligible credit institutions is to last for six months from the entry into force of the draft decree; this period can be extended subject to the approval of the European Commission . The bonds in question, which are to be listed on the Cyprus Stock Exchange, are to be issued and allocated at nominal value, in packages of 9 10 EUR 1 million , against payment of a commission to the Ministry of Finance and provided that their prospective holders have assigned adequate collateral to the Government of Cyprus . At the expiry of the contracts entered into for their allocation, the special government bonds are to be returned by their holders and cancelled . The draft law and draft decree also provide details on (i) the level of and pricing of the commission payable by beneficiary credit institutions to the bonds’ issuer ; (ii) the collateral eligibility criteria (including the type of eligible collateral and the ‘haircuts’ applicable to different types of collateral) ; (iii) the capital adequacy ratios that beneficiary credit institutions will need to maintain ; and (iv) the maximum amount of special government bonds to be allocated to each eligible beneficiary .

text: 5 Draft decree,

text: Article 6

text: 6 Draft law,

text: Article 14

text: 7 Draft law, Articles

text: and

text: ; draft decree,

text: Article 5

text: 11 Draft law,

text: Article 11

text: ; draft decree,

text: Article 5(9)

text: (a). According to

text: Article 5(10)

text: (e) of the draft decree, the collateral in question is to be kept at the CBC or the Authority for the Supervision and Development of Cooperative Credit Societies, for the credit institutions supervised by them.

text: 13 Draft law,

text: Article 10

text: ; draft decree,

text: Article 8

text: 2. General observations

text: 2.1 The ECB draws the consulting authority’s attention to previous ECB opinions issued at the request of other Member States and, in particular, to its comments on draft legislation sharing some of the features of the draft law and draft decree . 2.2 As already mentioned in previous opinions relating to national-level measures adopted in light of the financial turmoil, it is important that, regard being had to (i) the similarities of the causes and consequences of the crisis in the Member States; and (ii) the potential interdependencies of policy responses, national authorities coordinate their actions with their EU partners (inter alia with regard to the end of nationally-devised financial crisis exit schemes). The ECB draws, in this regard, attention to the declaration of the euro area summit in Paris of 12 October 2008, confirming the commitment of the euro area Heads of State to act decisively and in concert so as to restore confidence in financial markets and to help re-establish efficient financing conditions across the economy by means of (i) ensuring liquidity; (ii) facilitating the funding of banks; (iii) providing additional capital resources to financial institutions; and (iv) recapitalising distressed banks . These aims and principles were also endorsed by the European Council on 15 and 16 October 2008. Against this background, the ECB points out that initiatives put in place by national governments to restore confidence in the financial markets should aim at implementing the above aims and principles, in a spirit of close cooperation with other Member States, the EU institutions and the ECB. In particular, it is recalled that harmonisation of the measures implemented at national level is essential to ensure the integration of financial markets within the EU and, in particular, within the euro area. The ECB also emphasises that coordination regarding the duration of national financial support schemes across the EU is of crucial importance to ensure a level playing field . In addition, the ECB recalls the need for national support measures to be temporary in nature. The ECB notes that the measures envisaged in the draft law and draft decree are indeed temporary in nature, ensuring that the involvement of the Cypriot State will be limited in time.

text: 17 See, in particular,

text: of 3 October 2008 at the request of the Irish Minister for Finance on a draft Credit Institutions (Financial Support) Bill 2008;

text: of 15 October 2008 at the request of the Irish Minister for Finance on a draft Credit Institutions (Financial Support) Scheme 2008;

text: of 21 October 2008 at the request of the German Ministry of Finance on a Law on the implementation of a package of measures to stabilise the financial market and an order on its implementation;

text: of 23 October 2008 at the request of the Banca d’Italia on behalf of the Italian Ministry for Economic Affairs and Finance on two Decree-Laws containing urgent measures to guarantee the stability of the banking system and the continuity of the provision of credit;

text: of 24 October 2008 at the request of the Swedish Ministry of Finance on a draft proposal on stabilising measures for the Swedish financial system;

text: of 12 November 2008 at the request of the Banca d’Italia on behalf of the Italian Ministry for Economic Affairs and Finance on a draft ministerial decree containing provisions to implement Decree-Law No 157/2008 on further urgent measures to guarantee the stability of the credit system;

text: of 27 November 2008 at the request of the Greek Ministry of Economy and Finance on a draft law on enhancing liquidity of the economy to address the impact of the international financial crisis and on a draft decision on its implementation; and

text: of 9 February 2009 on the terms and conditions for the grant of State loans and guarantees in emergency situations. All ECB opinions are published on the ECB’s website at www.ecb.europa.eu.

text: 18 See ‘Declaration on a concerted European action plan of the euro area countries’, available on the former French Presidency’s website at www.ue2008.fr.

text: 19 See notably ECB Opinions

text: , paragraph 3.1 and

text: , paragraph 2.5.2.

text: 20 See notably ECB Opinions

text: , paragraph 2.2 and

text: , paragraph 3.3. 2.3 With these considerations in mind and against the background of the concrete guidance previously provided by the ECB and the EU institutions in this regard, the ECB has the following observations to make on the draft law and draft decree.

text: 3. Specific comments

text: 3.1 Eligibility for support The draft law and draft decree lay down a number of eligibility criteria that credit institutions need to fulfil in order to have access to the special government bonds under consideration in this opinion. The ECB notes with satisfaction that the subsidiaries of foreign credit institutions are expressly included within the scope of eligible credit institutions, as required by the European Commission in its guidance on the compliance of financial sector support schemes with State aid rules . 3.2 The ECB also notes that the draft law and draft decree provide that the main criterion for the allocation of the bonds is to be the contribution of each eligible credit institution to the financing of domestic households and SMEs as at 31 December 2008, calculated on the basis of each credit institution’s ‘aggregate domestic market share in business and housing loans’ . In the interests of clarity and legal certainty and with a view to ensuring equal treatment amongst financial institutions and avoiding market distortions, it is advisable that any element of discretion inherent in the allocation of special government bonds be removed from the draft law and draft decree and that any additional considerations of relevance to the determination of their allocation be explicitly mentioned in the draft legal acts. 3.3 Calculation of commissions and pricing The ECB notes that Article 5(8) of the draft decree specifies the commission to be charged upon allocation of the special government bonds. It also notes that the specification of this commission recognises the ECB’s contribution to the harmonisation and coordination, across the EU, of the pricing of State guarantees. In particular, the ECB recalls that it is important to ensure that the pricing of such government schemes is risk-based, market-oriented and determined on the basis of the costs of a corresponding scheme in the market. In this respect, the ECB understands that this commission is calculated in such a way that all three conditions are fulfilled.

text: 21 See the ‘Communication from the Commission – The application of State aid rules to measures taken in relation to financial institutions in the context of the current global financial crisis’ of 13 October 2008, available on the Commission’s website at www.ec.europa.eu. Paragraph 18 thereof specifies that ‘The eligibility criteria of financial institutions … must be objective, taking due account of their role in the relevant banking system and the overall economy, and non-discriminatory so as to avoid undue distortive effects on neighbouring markets and the internal market as a whole. In application of the principle of non discrimination on the grounds of nationality, all institutions incorporated in the Member State concerned, including subsidiaries, and with significant activities in that Member State should be covered by the scheme’. 3.4 Haircuts The ECB notes that Article 5(10) of the draft decree specifies the level of haircuts to be applied to collateral provided by the beneficiary credit institutions to the Cypriot government in return for the bonds allocated to them. The types of eligible collateral are listed in

text: Article 5(9)

text: (b)(i) to (iv). Under

text: Article 5(9)

text: (b)(i), collateral eligible in the Eurosystem for credit operations is also to be eligible as collateral for the allocation of the bonds. In the interests of clarity,

text: Article 5(9)

text: (b)(i) could benefit from the specification of the haircuts applicable to collateral eligible in the Eurosystem for credit operations when this is tendered by beneficiary credit institutions in consideration for the allocation of the bonds. 3.5 Reporting obligations Article 5(12) of the draft decree foresees quarterly reporting obligations for beneficiary credit institutions vis-à-vis the Ministry of Finance. The ECB notes that

text: Article 5(12)

text: (c) could benefit from clarification as to the conditions subject to which the ‘justification’ referred to in that provision is to be provided. In particular, it is unclear whether, in its current formulation, the reference made in that provision is to an increase in total credit facilities to SMEs and households or to the total outstanding amount of such credit facilities and whether it is the former or the latter that should correspond to the amount of special government bonds allocated to each beneficiary credit institution. The ECB understands

text: Article 5(12)

text: (c) to be consistent with the former interpretation. 3.6 Role of the central bank The ECB notes the CBC’s role in the proposed issuance of the special government bonds under consideration in this opinion and in the monitoring of their use. In particular, Article 3 of the draft law requires a recommendation of the Governor of the CBC prior to the adoption of any ministerial decrees determining the terms of its implementation. Moreover, the draft decree provides for the participation of two CBC representatives in the special Committee foreseen in

text: Article 6(1)

text: thereof, with the task of monitoring the draft law’s implementation and ensuring that the liquidity secured by beneficiary credit institutions benefits domestic borrowers and the national economy at large . 3.7 In addition, the ECB notes that the administrative penalties foreseen in Article 14 of the draft law in cases of non-compliance by beneficiary credit institutions with the terms and conditions for the use of the special government bonds as well as the partial or total revocation of such bonds allocated to non-compliant beneficiary credit institutions, can only be imposed following a recommendation of the Governor of the CBC (or of the Commissioner, as the case may be). 3.8 While appreciating the draft law’s recognition of the CBC’s expertise in its fields of competence, the ECB also expects that the CBC’s advisory functions will be performed in full compliance with

text: 23 The Committee, which is to be chaired by a representative of the Ministry of Finance, is to consist of two representatives of the Ministry of Finance (appointed by the Minister), two representatives of the CBC (designated by the Governor of the CBC and appointed by the Minister of Finance) and two representatives of the Authority for the Supervision and Development of Cooperative Societies (designated by the Commissioner and appointed by the Minister). its institutional and financial independence and with the prohibition on monetary financing laid down in Article 101(1) of the Treaty, read in conjunction with

text: Council Regulation (EC) No 3603/93 of 13 December 1993

text: specifying definitions for the application of the prohibitions referred to in Articles

text: and

text: b(1) of the Treaty . In this respect, the ECB welcomes the clarification of Article 6(3) of the draft decree which expressly provides that the establishment and operation of the Committee referred to in

text: Article 6(1)

text: is to be without prejudice to the competences of the CBC (or of the Authority for the Supervision and Development of Cooperative Societies). This opinion will be published on the ECB’s website. Done at Frankfurt am Main, 1 October 2009. [signed] The President of the ECB Jean-Claude TRICHET

text: 24 OJ L 332, 31.12.1993, p. 1.


text: EGT L 189, 3.7.1998, s. 42. 2 Alla ECB:s yttrande finns på ECB:s webbplats www.ecb.europa.eu.

text: Se ECB:s yttranden

text: , punkt 3.1,

text: , punkt 2.5.2 och

text: , punkt 3.2. 4 Se ECB:s yttranden

text: , punkt 2.2,

text: , punkt 3.3 och

text: , punkt 3.2.

publisher: Europeiska centralbanken

sprak: sv

title: Europeiska centralbankens yttrande av den 7 oktober 2009 om förlängd giltighet för förordning 2008:819 om statliga garantier till banker m.fl. (CON/2009/79)

serie: con

text: EUROPEISKA CENTRALBANKENS YTTRANDE av den 7 oktober 2009 om förlängd giltighet för förordning 2008:819 om statliga garantier till banker m.fl. (

text: ) Inledning och rättslig grund

type: rubrik

text: Den 2 oktober 2009 mottog Europeiska centralbanken (ECB) en begäran från Finansdepartementet om ett yttrande över ett utkast till förordning om ändring i förordningen 2008:819 om statliga garantier till banker m.fl. (nedan kallat förslaget till förordning). ECB:s behörighet att avge ett yttrande grundas på artikel 105.4 i fördraget om upprättandet av Europeiska gemenskapen och artikel 2.1 sjätte strecksatsen i

text: rådets beslut 98/415/EG av den 29 juni 1998

text: om nationella myndigheters samråd med Europeiska centralbanken rörande förslag till rättsregler , eftersom förslaget till förordning innehåller regler som gäller finansiella institut som har en påtaglig inverkan på de finansiella institutens och marknadernas stabilitet. I enlighet med

text: artikel 17.5

text: första meningen i arbetsordningen för Europeiska centralbanken har detta yttrande antagits av ECB-rådet.

type: stycke

text: 1. Syftet med förslaget till förordning

text: Genom förslaget till förordning ändras förordningen om statliga garantier till banker m.fl. (SFS 2008:819) som utfärdades av Finansdepartementet den 29 oktober 2008. ECB ombads yttra sig över utkastet till förordning 2008:819 och avgav sitt yttrande

text: den 29 oktober 2008 . I mars 2009 ombads ECB yttra sig över ett förslag till ändring av förordning 2008:819 och avgav sitt yttrande

text: . Enligt det gällande regelverket upphör det svenska garantiprogrammet att gälla den 31 oktober 2009. Programmet och andra åtgärder har visserligen bidragit till att stabilisera de finansiella marknaderna, men den svenska regeringen bedömer att marknaderna ännu inte har återgått till det normala och att det därför krävs ytterligare stöd. I promemorian som åtföljer förslaget till förordning hänvisar den svenska regeringen till den ekonomiska situationen i de baltiska staterna och skriver att situation så här långt har utvecklats bättre än väntat.

text: Bankerna har gjort stora avsättningar i sina balansräkningar för framtida förluster, och för att garantera en fortsatt fungerande finansiering föreslår den svenska regeringen att garantiprogrammet förlängs med sex månader, till den 30 april 2009, med i övrigt oförändrade villkor.

text: 2. Allmänna kommentarer

text: Ett tidsbegränsat garantiprogram

text: I enlighet med Ekofinrådets slutsatser av den 7 oktober 2008 och den deklaration som antogs av statscheferna för euroområdet den 12 oktober 2008 noterar ECB att en harmonisering av de åtgärder som vidtas på nationell nivå är nödvändig för att säkerställa integrationen av EU:s finansmarknader, särskilt inom euroområdet. I detta sammanhang understryker ECB även att en samordning av giltighetstiderna för de olika nationella stödåtgärderna inom EU är mycket viktig för att säkerställa konkurrens på lika 3 4 villkor . ECB understryker därutöver att nationella stödåtgärder bör vara tidsbegränsade . Den föreslagna förlängningen av programmet motiveras av ett fortsatt behov inom den nationella finanssektorn och eftersom garantiprogrammet även fortsättningsvis är tidsbegränsat kommer således även den svenska statens engagemang att vara tidsbegränsat.

text: Detta yttrande kommer att offentliggöras på ECB:s webbplats.

text: Utfärdat i Frankfurt am Main den 7 oktober 2009.

text: [Namnteckning]

text: Jean-Claude TRICHET

text: ECB:s ordförande

type: vagledning

utgivare: ecb


text: OJ L 189, 3.7.1998, p. 42.

sprak: en

title: Opinion of the European Central Bank of 9 October 2009 on involvement of De Nederlandsche Bank in the monetary system in Bonaire, Sint Eustatius and Saba (CON/2009/80)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 9 October 2009 on involvement of De Nederlandsche Bank in the monetary system in Bonaire, Sint Eustatius and Saba (

text: ) Introduction and legal basis

text: On 24 August 2009 the European Central Bank (ECB) received a request from the Dutch Ministry of Finance for an opinion on the draft rules on the monetary system in Bonaire, Sint Eustatius and Saba (hereinafter the ‘draft law’). The ECB’s competence to deliver an opinion is based on Article 105(4) of the Treaty establishing the European Community and the third indent of

text: Article 2(1) of Council Decision 98/415/EC of 29 June 1998

text: on the consultation of the European Central Bank by national authorities regarding draft legislative provisions , as the draft law relates to De Nederlandsche Bank (DNB). In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.

text: 1. Purpose of the draft law

text: The draft law will regulate the monetary system of the islands of Bonaire, Sint Eustatius and Saba (hereinafter the ‘BES islands’), and specifically will assign the status of legal tender to the US dollar in the BES islands and will impose specific tasks on DNB.

text: 2. General observations

text: 2.1 The BES islands, which are currently part of the Netherlands Antilles, will become public bodies within the meaning of Article 134 of the Dutch Constitution and part of the territory of the Netherlands. The Netherlands Antilles will cease to exist as a country within the Netherlands. The BES islands will also remain overseas countries and territories within the meaning of Part 4 of the Treaty. Therefore, although the BES islands will become part of the territory of the Netherlands, they will not become part of the territory where the Treaty applies in full.

text: 2.2 As regards the tasks conferred to DNB under the draft law, the ECB welcomes the fact that DNB will be reimbursed by the Dutch State for any costs incurred in connection with its monitoring of the preparations for the currency changeover in the BES islands.

text: 3. Compatibility of DNB’s new tasks with the Treaty

text: Article 4(1) of the draft law assigns to DNB the task of promoting the smooth operation of payment systems in the BES islands, including the circulation of US dollar banknotes and coins. According to

text: Article 4(2)

text: , further rules in respect of this task may be laid down by a general administrative regulation on which the ECB also expects to be consulted in due time. The ECB understands that: (i) in principle, commercial banks will distribute US dollar banknotes and provide US dollar accounts so that the central bank will not be directly involved; (ii) DNB will discuss with the US authorities, including the Federal Reserve, in particular its coordinating role in screening and withdrawing from circulation counterfeit US dollar banknotes; (iii) DNB will monitor the preparations for the changeover to the US dollar. In this context, the ECB makes the following observations. The ECB is of the opinion that these tasks qualify as non-ESCB tasks within the meaning of Article 14.4 of the Statute of the European System of Central Banks and of the European Central Bank (hereinafter the ‘Statute of the ESCB’). Article 14.4 of the Statute of the ESCB provides that national central banks may perform functions other than those specified in the Statute of the ESCB unless the Governing Council finds, by a majority of two thirds of the votes cast, that these interfere with the objectives and tasks of the ESCB. The objectives and tasks of the ESCB include the primary objective of maintaining price stability, and the basic tasks of defining and implementing monetary policy and conducting foreign-exchange operations. As currently envisaged under the draft law, the abovementioned DNB tasks do not currently appear to have the potential of interfering with the objectives and tasks of the ESCB. Moreover, while the performance of these essentially monetary tasks by DNB does not raise any monetary financing concerns, DNB is subject to the monetary financing prohibition with respect to any activities it conducts in the BES islands in the same way as in the rest of the territory of the Netherlands. The ECB understands that DNB may be asked in the future to provide liquidity assistance in US dollars to commercial banks located in the BES islands, through for instance either DNB’s foreign currency portfolio or the borrowing of US dollars via swap arrangements. In the same vein, DNB may also be assigned supervisory tasks in these public bodies with respect to financial institutions (see the legislation referred to in Article 6.6, 6.9 and 6.10 of the Amending Law BES). Such tasks performed by DNB in the BES islands are important and should receive due consideration. It is however understood that assigning these new tasks to DNB will require an amendment to the 1998 Law on banking on which the ECB expects to be consulted in due time.

text: This opinion will be published on the ECB’s website. Done at Frankfurt am Main, 9 October 2009. [signed]

text: The President of the ECB

text: Jean-Claude TRICHET


title: Opinion of the European Central Bank of 23 October 2009 on the extension of State Treasury support to financial institutions (CON/2009/82)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 23 October 2009 on the extension of State Treasury support to financial institutions (

text: ) Introduction and legal basis

text: On 13 October 2009 the European Central Bank (ECB) received a request from the Polish Minister for Finance for an opinion on a draft law amending the Law on the provision of State Treasury support to financial institutions (hereinafter the ‘draft law’). The ECB’s competence to deliver an opinion is based on Article 105(4) of the Treaty establishing the European Community and the sixth indent of

text: on the consultation of the European Central Bank by national authorities regarding draft legislative provisions , as the draft law contains rules applicable to financial institutions insofar as they materially influence the stability of financial institutions and markets. In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.

text: 1. Purpose of the draft law

text: 1.1 The draft law amends the Law of 12 February 2009 on the provision of State Treasury support to financial institutions (hereinafter the ‘Law of 12 February 2009’) on which the ECB was consulted at the drafting stage in November 2008 . The Law of 12 February 2009 introduced a scheme whereby various support measures were offered to eligible financial institutions , including: (i) State guarantees for the repayment of refinancing credit (extended to a bank by Narodowy Bank Polski) or a credit facility or loan provided within a line of credit (extended by a bank to another bank); (ii) loans of Treasury securities; and (iii) preferential sales of Treasury securities to financial institutions. Under the provisions currently in force, the support measures are available to eligible financial institutions until 31 December 2009 .

text: 1 OJ L 189, 3.7.1998, p. 42.

text: 2 As published in Dziennik Ustaw of 2009 No 39, Item 308.

text: 3 See Opinion

text: ; all ECB opinions are published on the ECB’s website at www.ecb.europa.eu.

text: 4 The Law of 12 February 2009, as adopted by the Parliament, specified six categories of financial institutions established in Poland that were eligible for the support measures: banks, credit unions, investment funds, brokerage houses, insurance companies and pension funds. 1.2 Since the Polish Government intends to ‘prepare for further potential consequences of the global financial crisis …’ , the aim of the draft law is to extend the deadline by which eligible financial institutions may apply for support to 31 December 2010 . At the same time, attention is drawn in the explanatory memorandum to the fact that ‘granting support under the Law must be preceded by a notification of the scheme to the Commission’ , and that under the existing State aid approval support measures may be applied until 25 March 2010 . Hence, the draft law introduces a provision under which the extension will apply from when the Commission’s State aid approval is granted . 1.3 The draft law does not change the conditions of support, the criteria by which the eligibility of financial institutions is assessed or any parameters of the support scheme other than the deadline by which eligible financial institutions may apply for support.

text: 2. Specific observations

text: 2.1 Interaction of the draft law with monetary policy decisions 2.1.1 Since the aim of the draft law is to extend the scope of the support scheme laid down in the Law of 12 February 2009 on which the ECB has already been consulted, the ECB would like to reiterate certain points mentioned in its Opinion

text: that are important from the perspective of monetary policy. 2.1.2 First, the ECB notes that the Law of 12 February 2009 does not explicitly exclude interbank deposits from among the obligations that may be secured with a State guarantee. Although the draft law amends the Law of 12 February 2009, the ECB understands that it does not include amendments which explicitly exclude interbank deposits. In this respect, the ECB reiterates its view that State guarantees to cover interbank deposits should be avoided as they have the potential to interfere with the conduct of the central bank’s liquidity-providing operations, and thus have an impact on the transmission of Narodowy Bank Polski’s monetary policy decisions . 2.1.3 Second, the ECB understands that the Law of 12 February 2009 introduces an explicit legal basis for the provision of State guarantees securing the repayment of Narodowy Bank Polski’s refinancing credit, including in cases where such credit is provided as emergency liquidity assistance (ELA). In this context the ECB would like to reiterate that, in order to ensure that the extension by national central banks of ELA secured by a State guarantee complies with the monetary financing prohibition, it is essential that the State guarantee covers 100 % of the amount

text: 6 See the explanatory memorandum to the draft law, p. 1.

text: 8 See the explanatory memorandum to the draft law, p. 1.

text: 9 Case No N 208/2009, approval granted on 25 September 2009 for a period of six months from that date.

text: 11 See sub-paragraph 3.2(i) of Opinion

text: ; see also, for example, paragraph 3.2 of Opinion

text: and paragraph 2.3 of Opinion

text: 12 See paragraph 4.3 of Opinion

text: . of the credit where such guarantee would constitute the sole form of collateral for the ELA operation, and not only up to 50 % of the amount remaining for repayment, as stated in the Law of 12 February 2009 . 2.2 Temporary nature of the scheme In line with the conclusions of the Ecofin Council of 7 October 2008 and the Declaration issued by the Heads of State of the euro area on 12 October 2008, the ECB notes that harmonisation of the measures implemented at national level is essential to ensure the integration of financial markets within the European Union. In this regard, the ECB emphasises that coordination regarding the duration of national financial support schemes across the EU is of crucial importance in order to ensure a level playing field . In addition, the ECB stresses the need for national support measures to be temporary in nature . It is therefore assumed that the temporary nature of the support scheme introduced under the Law of 12 February 2009 is essentially maintained under the draft law and that the involvement of the Polish State will be limited in time. This opinion will be published on the ECB’s website. Done at Frankfurt am Main, 23 October 2009. [signed] The President of the ECB Jean-Claude TRICHET

text: 14 See ECB Opinions

text: , paragraph 3.1,

text: , paragraph 2.5.2 and

text: , paragraph 3.2.

text: 15 See ECB Opinions

text: , paragraph 2.2,

text: , paragraph 3.3 and

text: , paragraph 3.2.


text: OJ L 189, 3.7.1998, p. 42.

text: Opinion

text: , paragraph 2.1. All ECB opinions are published on the ECB’s website at www.ecb.europa.eu. 3 Opinion

text: , paragraph 2.1. 4 The ECB’s Convergence Report May 2008, pp. 20-21; and ECB Opinions

text: , and

text: The ECB’s Convergence Report May 2008, p. 20; and Opinion

text: , paragraph 2.2. 6 Opinion

text: , paragraph 2.3; and Opinion

text: , paragraph 2.2. 7 The ECB’s Convergence Report May 2008, p. 20. 8 OJ L 332, 31.12.1993, p. 1. 9 Article 105(1) of the Treaty; and Article 2 of the Statute of the ESCB. 10 The ECB’s Convergence Report May 2008, p. 22. 11 Opinion

text: , paragraph 9.

text: Opinion

text: , paragraph 3.2. 13 Opinion

text: , paragraph 2.2; and Opinion

text: , paragraph 3.4. 14 The ECB’s Convergence Report May 2008, p. 21. 15 Opinion

text: , paragraph 3.2. 16 Opinion

text: , second subparagraph of paragraph 3.2.

text: Opinion

text: , paragraph 3.3.

title: Opinion of the European Central Bank of 23 October 2009 on the distribution of Lietuvos bankas’s profits (CON/2009/83)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 23 October 2009 on the distribution of Lietuvos bankas’s profits (

text: ) Introduction and legal basis

text: On 14 October 2009 the European Central Bank (ECB) received a request from the Lithuanian Ministry of Finance for an opinion on a draft law amending Article 23 of the Law on Lietuvos bankas as regards the rules on the distribution of the profits of Lietuvos bankas (hereinafter the ‘draft law’). The ECB’s competence to deliver an opinion is based on Article 105(4) of the Treaty establishing the European Community and the third indent of

text: Article 2(1) of Council Decision 98/415/EC of 29 June 1998

text: on the consultation of the European Central Bank by national authorities regarding draft legislative provisions , as the draft law relates to Lietuvos bankas. In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.

text: 1. Purpose of the draft law

text: 1.1 The draft law provides that Lietuvos bankas should contribute 70 % of its profit for the financial year to the State budget, instead of 50 % of its profit, as currently provided for in the Law on Lietuvos bankas. The contribution to the State budget is to be made only after making a deduction to cover any losses carried forward from previous financial years. 1.2 According to Article 23(3) of the Law on Lietuvos bankas as it currently stands, the profit for a financial year is to be allocated as follows: first, to cover losses carried forward from previous financial years; second, to contribute to the State budget 50 % of the profit of Lietuvos bankas for the financial year in question, after making any deduction to cover losses carried forward from previous financial years; and third, until the authorised capital reaches 200 million litas, the remaining profit is allocated in equal parts between the authorised capital and the reserve capital, thereafter any residual amount is allocated to the reserve capital.

text: 2. General observations

text: 2.1 On 24 March 2009 the ECB adopted Opinion

text: at the request of Lietuvos bankas on behalf of the Ministry of Finance of Lithuania on a draft law amending the Law on Lietuvos bankas as regards the rules on the distribution of the profits of Lietuvos bankas (this draft law hereinafter the ‘March draft law’). The March draft law provided that Lietuvos bankas should contribute, extraordinarily, 100 % of its profit for the financial year 2008 to the State budget, instead of 50 % of its profit, as provided for in the Law on Lietuvos bankas. If the March draft law had been adopted, Lietuvos bankas would have had no funds to transfer to the authorised and/or reserve capital for 2008. 2.2 In Opinion

text: the ECB noted that, first, the March draft law raised concerns regarding its compatibility with the institutional independence of Lietuvos bankas to the extent that it could have been construed as an instruction to Lietuvos bankas; and, second, it also raised concerns about the financial independence of Lietuvos bankas, as all its profit was to be contributed to the State budget. The ECB concluded that an ad hoc change to the rules on the distribution of profits, which reflected a particular financial need of the main shareholder and which took all the profits from the central bank, was a cause of particular concern and was not compatible with the Treaty or the Statute of the European System of Central Banks and of the European Central Bank (hereinafter the ‘Statute of the ESCB’). The ECB notes that its remarks were taken into account. 2.3 The draft law proposes to increase the part of the profits of Lietuvos bankas to be transferred to the State budget from 50 % to 70 %, which is not an ad hoc change but an amendment of the permanent rule. The ECB’s remarks on the financial independence of Lietuvos bankas and the requirement to comply with the monetary financing prohibition expressed in Opinion

text: , and in other subsequent opinions, remain valid. 2.4 Central bank financial independence 2.4.1 Each Member State is obliged to safeguard the institutional and financial independence of its national central bank (NCB), thus ensuring the proper performance of its tasks under the Treaty and the Statute of the ESCB . In particular, the compatibility of the Law on Lietuvos bankas with the requirements of Article 108 of the Treaty and the provisions of the Statute of the ESCB on central bank independence is of utmost importance, as Lietuvos bankas’s primary objective of price stability is best served by it being a fully independent institution with a precisely defined mandate . 2.4.2 The concept of financial independence should be assessed from the perspective of whether any third party is able to exercise either direct or indirect influence not only over an NCB’s tasks but also over its ability (understood both operationally in terms of manpower, and financially in terms of appropriate financial resources) to fulfil its mandate . Therefore, a Member State may not put its

text: NCB in a position where it has insufficient financial resources to carry out its ESCB-related tasks . NCBs must also have sufficient financial means to carry out their other functions at all times, i.e. they must be able to perform their national tasks, to meet their international obligations and properly to cover their administrative and operational expenses . 2.4.3 The ECB also reminds the consulting authority that Articles 28.1 and 30.4 of the Statute of the ESCB (the latter applies to Member States that have adopted the euro) provide for the possibility of further calls being made on the NCBs to make contributions to the ECB’s capital and to make further transfers of foreign reserves . The principle of financial independence requires that compliance with these provisions would leave an NCB’s ability to perform its functions unimpaired. 2.5 The monetary financing prohibition 2.5.1 National rules on the distribution of an NCB’s profits must comply with the monetary financing prohibition laid down in Article 101(1) of the Treaty and

text: Council Regulation (EC) No 3603/93 of 13 December 1993

text: specifying definitions for the application of the prohibitions referred to in Articles

text: and

text: b(1) [now Articles

text: and

text: ] of the Treaty . 2.5.2 As referred in ECB Opinion

text: of 14 July 2009 on the taxation of the Banca d’Italia’s gold reserves, those provisions prohibit central bank (ECB or NCB) credit facilities in favour of Community institutions or bodies or in favour of the Member States or their public sector bodies, as well as direct central bank purchases of debt instruments from such entities. With a view to preserving the integrity of the central bank’s balance sheet, the monetary financing prohibition is of key importance to ensuring the primary monetary policy objective of price stability , which must not be impeded. Therefore, the prohibition must be interpreted extensively to ensure its strict application . Thus, even though Article 101(1) of the Treaty refers to ‘credit facilities’, i.e. with the obligation to repay such credit, this prohibition may also apply a fortiori to other forms of funding, i.e. without the obligation to repay, since Article 101 of the Treaty has the overall aim of public financial discipline and of prohibiting NCBs from financing the public sector. Both the ultimate objective and the spirit of these provisions must be taken into account in their interpretation .

text: 3. Specific comments

text: 3.1 The draft law modifies the rules on the allocation of Lietuvos bankas’s profits in the current financial turmoil. While, according to the consulting authority, the aim of the draft law is to enhance the stability and credibility of the Lithuanian financial system, the ECB stresses that it is, in any circumstances, particularly important to secure and strengthen the independence of Lietuvos bankas, and even more so in periods of crisis. Moreover, overcoming the current financial turmoil depends on the ability of central banks to carry out their functions independently . 3.2 With regard to profit allocation, an NCB’s statutes may prescribe how its profits are to be allocated. Even though amendments to such rules are possible, they should not be changed frequently. It is important to protect the rules relating to the distribution of profits from third-party interests and to ensure a legal framework that provides a stable and long-term basis for the central bank’s functioning . 3.3 As the ECB noted in its Convergence Report of May 2008 , the distribution of its profits is one of the areas of financial independence where an NCB is most vulnerable to outside influence. In this context the ECB understands that the draft law will reduce the financial means available to Lietuvos bankas for allocation to its authorised and/or reserve capital. According to the principle of financial independence (as stressed by the ECB in all its convergence reports, including the Convergence Report of May 2006 regarding Lithuania), with regard to making financial provisions or buffers an NCB must be free to decide independently on making financial provisions to safeguard the real value of its capital and assets. 3.4 The economic purpose of central bank capital and reserves is to ensure that the central bank will always and in all circumstances have at its disposal the necessary financial resources to conduct monetary policy. According to Article 23(2) of the Law on Lietuvos bankas, Lietuvos bankas uses the reserve capital to cover possible losses of a financial year. There must be regard for the longterm perspective of the distribution of profits. It is of the utmost importance to make sufficient provisions of reserve capital during years of profit to allow Lietuvos bankas to face possible losses without weakening its financial means for implementing its monetary policy . 3.5 In principle it is not optimal for a central bank to create reserves only after transferring a large portion of its profits to the State budget . Should Lietuvos bankas experience negative equity in the future (i.e. losses exceeding accumulated reserves), it would be hard to rebuild it out of the stream of future profits under such an arrangement. Although Lietuvos bankas had positive net equity at the end of 2008 and expects it to be positive also at the end of 2009, prudence is required to ensure stable and sufficient financial resources in the long term.

text: 3.6 The ECB recommends that, in view of Lietuvos bankas’s obligations under the Treaty and the Statute of the ESCB, any changes to its financial obligations towards the State should be decided in cooperation with the Board of Lietuvos bankas, taking into account its specific central bank tasks . It is not clear from the consultation letter whether the consulting authority initiated the draft law in cooperation with Lietuvos bankas, after careful and cautious assessment of the current status of Lietuvos bankas’s reserve capital, including projections of negative scenarios. Since an NCB is best placed and has all the necessary tools to evaluate these circumstances and to make forecasts, any new regime for the allocation of profits to the State should be made in close coordination with Lietuvos bankas. 3.7 The data available to the ECB shows that, relatively, the net equity (including capital and reserves) of non-Eurosystem NCBs is much lower than that of the Eurosystem NCBs; the data also shows that the ratio between risk-bearing assets and net equity is several times higher in non-Eurosystem NCBs than in the Eurosystem NCBs (the higher the ratio is in absolute terms, the lower the ability of a central bank to cover the risk of adverse asset price movements or defaults). The ECB understands that Lietuvos bankas is still in the process of building up its reserve capital to a level corresponding to that of the Eurosystem NCBs.

text: 4. Final observations

text: 4.1 Summarising the above arguments, the ECB concludes that the reduction of the financial means available to Lietuvos bankas for allocation to its reserve capital could hamper Lietuvos bankas from continuing the process of building up its reserve capital to a level corresponding to that of the Eurosystem NCBs. It could undermine Lietuvos bankas’ financial independence as, in the worst scenario, if the reserve capital of Lietuvos bankas were not sufficient to cover possible losses, there could be a threat that Lietuvos bankas would not autonomously be able to avail itself of sufficient financial resources to fulfil its mandate. This could impair its independent functioning. Each Member State must ensure that its NCB has sufficient financial resources to carry out its ESCBrelated tasks. 4.2 Moreover, any amendment to the rules on the distribution of Lietuvos bankas’s profits should only be initiated in coordination with Lietuvos bankas, which is best placed to provide an expert assessment of the amount or ratio of the reserve capital necessary to cover its possible needs or losses related to its operational activities, including performance of its ESCB-related tasks. Only once such a detailed impact assessment has been made, can the ECB make a final analysis of compliance with the monetary financing prohibition.

text: This opinion will be published on the ECB’s website. Done at Frankfurt am Main, 23 October 2009. [signed]

text: The President of the ECB

text: Jean-Claude TRICHET


text: OJ L 189, 3.7.1998, p. 42.

text: All ECB opinions are available on the ECB’s website at www.ecb.europa.eu.

text: See ‘Policy statement on euro payment and settlement systems located outside the euro area’, available on the ECB’s website.

text: See ‘The Eurosystem’s policy line with regard to consolidation in central counterparty clearing’, available on the ECB’s website.

text: A domestic system is defined in the policy statement as a system ‘which handles mainly or exclusively assets denominated in one currency’.

text: See paragraphs 2 and 3 of ‘The Eurosystem policy principles on the location and operation of infrastructures settling euro-denominated payment transactions’, published on 19 July 2007 and available on the ECB’s website.

text: See ‘Decisions taken by the Governing Council of the ECB (in addition to decisions setting interest rates)’ for December 2008 and July 2009, available on the ECB’s website.

text: Available on the ECB’s website.

title: Opinion of the European Central Bank of 26 October 2009 on supervision by De Nederlandsche Bank of clearing and settlement services (CON/2009/84)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 26 October 2009 on supervision by De Nederlandsche Bank of clearing and settlement services (

text: ) Introduction and legal basis

text: The Dutch Ministry of Finance did not consult the ECB on an amended draft law concerning the supervision of clearing and settlement institutions (hereinafter the ‘amended draft law’). The ECB’s competence to be consulted on the amended draft law is based on Article 105(4) of the Treaty establishing the European Community and the third and fifth indents of

text: on the consultation of the European Central Bank by national authorities regarding draft legislative provisions , as the legislation relates to De Nederlandsche Bank (DNB) and payment and settlement systems. On 5 February 2007, the ECB received a request from the Dutch Ministry of Finance for an opinion on a draft law concerning systemic supervision of clearing and settlement institutions (hereinafter the ‘draft law’). The draft law stated, inter alia, that it is forbidden to provide clearing and settlement services in the Netherlands without an authorisation from DNB, that DNB provides prudential supervision of the clearing and settlement institutions and that the Authority Financial Markets (AFM) performs market conduct supervision (defined as the promotion of orderly and transparent financial market processes). The ECB responded by adopting and communicating its Opinion

text: . The initial draft law sent for an opinion to the Dutch Council of State did not include a separate provision on clearing and settlement institutions established in another State. It only prohibited the provision of clearing and settlement services in the Netherlands without DNB’s authorisation for that purpose. This prohibition applied to clearing and settlement institutions whether established in the Netherlands or another State, whereby no distinction was made between other Member States and third countries. As regards clearing and settlement institutions established in another State, no distinction was made between conducting business from a branch situated in the Netherlands and providing services to the Netherlands. Hence the prohibition against unauthorised provision of clearing and settlement services applied to all these situations. At the advice of the Dutch Council of State (Raad van State), the Ministry of Finance has subsequently amended, in particular, the cross-border aspects of the draft law as regards the authorisation obligations

text: and requirements for providing clearing and settlement services to participants with whom the party providing the services is not affiliated in a group for the following cases:  for clearing and settlement institutions established in the Netherlands intending to provide clearing and settlement services to participants,  for clearing and settlement institutions established outside the Netherlands intending to provide clearing and settlement services to participants from a branch situated in the Netherlands,  for clearing and settlement institutions established in a designated State intending to provide clearing and settlement services in the Netherlands to participants from a branch situated in the Netherlands who must notify DNB,  for clearing and settlement institutions established in a non-designated State intending to provide clearing and settlement services in the Netherlands to participants by providing services to the Netherlands,  for clearing and settlement institutions established in the Netherlands which have an authorisation as referred to in Section 2:3.0a of the amended draft law and intending to provide clearing and settlement services from a branch situated outside the Netherlands to participants; these clearing and settlement institutions require prior approval. This amendment to the scope of the draft law does not differentiate between clearing and settlement institutions located in and outside the euro area. The amendments to the authorisation obligation and requirements for clearing and settlement institutions are substantive changes which the Ministry of Finance should have submitted for consultation to the ECB. In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.

text: 1. Current situation and purpose of the amended draft law

text: 1.1 Under the legislation in force, oversight of clearing and settlement institutions covers the promotion of the smooth operation of payment systems, the prevention of systemic risk, overseeing safety, reliability and efficiency of systems and products, maintaining consumers’ confidence and targeting (parts) of infrastructure providers. Within this oversight environment, DNB is competent for prudential aspects and the Authority Financial Markets (AFM) for market conduct aspects. 1.2 The ECB understands that the legislative changes contained in the amended draft law introduce the supervisory framework and are justified on page 5 of the Explanatory Memorandum to the amended draft law. Nevertheless, the ECB stresses that the changes in the supervisory framework must not prejudice the Eurosystem’s competences, in particular in relation to oversight. 1.3 The intended purpose of the amended draft law is to introduce direct supervision of clearing and settlement institutions to strengthen and complement the existing oversight framework. By introducing direct supervision, the legislator aims to promote the solidity and continuity of clearing

text: 2. General observations

text: The draft law is intended to establish a consistent legal framework for the supervision of clearing and settlement institutions providing clearing and settlement services in and to the Netherlands to promote the reliability and stability of the market. The ECB notes the proposed introduction of direct supervision of clearing and settlement services to be conducted by DNB and views this as a means to complement and strengthen DNB’s oversight role. With a view to implementing the core tasks of the European System of Central European Banks (ESCB) under the Treaty and the Statute of the European System of Central Banks and of the European Central Bank (hereinafter the ‘Statute of the ESCB’), the ECB has serious concerns relating to the proposed authorisation requirements for clearing and settlement institutions. Although the enforcement of the Eurosystem location policy is not the aim of the draft law, the ECB would like to point out that the way in which the authorisation requirements are set out may adversely affect the location policy of the Governing Council for infrastructures offering services in euro.

text: 3. Location of infrastructures

text: 3.1 The Governing Council’s location policy 3.1.1 The location policy has been publicly expressed on a number of occasions since the ECB’s establishment. Already in November 1998, the first policy statement was made in which it was stressed, inter alia, that ‘As is the case with every central bank, the ECB has a direct interest in the prudent design and management of any payment and settlement system processing its own currency, the euro. Indeed, the smooth functioning of payment and settlement systems is a crucial aspect of a sound currency and essential to the conduct of monetary policy. These systems also have a significant bearing on the functioning of financial markets. Changes in payment systems may cause unpredictable shifts in the demand for, or supply of, base money. Moreover, safe and efficient payment systems are critical to the maintenance of banking and financial stability. Against this background, … the Governing Council of the ECB wishes to underline that, as in any other

text: monetary system, central bank money in euro can only be provided by the central banks that belong to the euro area.’ 3.1.2 The November 1998 statement was followed up by another policy statement in September 2001 relating to central counterparty clearing . Section 2(b) of this statement stated, inter alia, that the ‘logical geographical scope of a market infrastructure is in practice the currency area’, and that domestic infrastructures for the euro ‘should logically be located in the euro area, as is the case with core infrastructures in other monetary areas. This would be preferable from a regulatory perspective and would help the Eurosystem, as the “central bank” of the euro, to ensure the smooth functioning of payment systems, efficient monetary policy implementation and financial stability.’ It also stated that the ‘location of central counterparties in the euro area would facilitate the provision, when deemed necessary and appropriate, of central bank money in euro.’ In this regard, point b) of the conclusions stresses that ‘The natural geographical scope for any “domestic” market infrastructure (including central counterparty clearing) for securities and derivatives denominated in euro is the euro area. Given the potential systemic importance of securities clearing and settlement systems, this infrastructure should be located within the euro area.’ 3.1.3 The Governing Council’s location policy is expressly based on the premise that ‘the ECB and the national central banks of the Eurosystem (the central banks of issue) need to retain, in any event, ultimate control over their currency, the euro. Therefore, from both a general policy and systemic risk perspective, the Eurosystem cannot, as a matter of principle, accept that payment infrastructures for euro transactions which are located outside the euro area (the home currency area) have the potential to develop into major euro payment infrastructures, particularly if this were to put at stake the Eurosystem’s control over the euro’ . 3.1.4 The Governing Council confirmed its location policy more recently in relation to central counterparties for over-the-counter derivatives in December 2008 and July 2009 . 3.2 Location policy and Treaty freedoms 3.2.1 As to whether the Governing Council’s location policy could be seen to pose any regulatory or legal issues related to the concept of the internal market, it is recalled that Article 14(2) of the Treaty states that the internal market comprises ‘an area without internal frontiers in which the free movement of goods, persons, services and capital is ensured in accordance with the provisions of this Treaty’. These freedoms are further regulated in particular in Title III of the Treaty (Articles

text: ) and also apply to the Eurosystem (because Article 1.1 of the Statute of the ESCB provides that the ESCB and the ECB must perform their tasks and carry out their activities ‘in

text: accordance with the provisions of [the] Treaty and [the] Statute’). Furthermore,

text: Article 3(1)

text: (c) of the Treaty provides that the establishment of an internal market characterised by the abolition, as between Member States, of obstacles to the free movement of, inter alia, services and capital is one of the activities of the Community. Moreover, under Article 4(1) of the Treaty, the activities of the Member States and the Community include the adoption of an economic policy which is based, inter alia, on the internal market. From the foregoing, it is evident that the establishment and functioning of the internal market is one of the core activities of the Community itself. 3.2.2 The Treaty freedoms underlying the internal market must be seen in the context of the Treaty as a whole. In this respect, the ECB emphasises that the tasks of the Community are identified under Article 2 of the Treaty as being achieved ‘by establishing a common market and an economic and monetary union’. Moreover, Article 4(2) of the Treaty states that ‘concurrently with the foregoing’ (i.e. with the adoption of an economic policy based, inter alia, on the internal market), the activities of the Member States and the Community include, inter alia, the introduction of a single currency and the definition and conduct of a single monetary policy, the primary objective of which is ‘to maintain price stability and, without prejudice to this objective, to support the general economic policies in the Community, in accordance with the principle of an open market economy with free competition’. 3.2.3 The Eurosystem’s tasks relating to monetary policy, payment systems and financial stability are inextricably linked to the Governing Council’s abovementioned statement in July 2007 that the Eurosystem central banks ‘need to retain, in any event, ultimate control over their currency, the euro’. While the Eurosystem generally has to comply with the Treaty freedoms and, in particular, has to consider their implications if it wishes to make use of its regulatory power to ensure efficient and sound clearing and payment systems, this does not mean that the ECB may not impose measures that would have an impact on the Treaty freedoms, if such measures are strictly warranted in order to perform the Eurosystem’s basic tasks. In this respect, the ECB considers that it is highly significant that, under the Treaty, the Eurosystem’s monetary policy, financial stability and oversight tasks only apply to those Member States that have adopted the euro. 3.3 Location policy and oversight of clearing and settlement systems 3.3.1 In order to perform its core tasks, the Eurosystem needs to ensure the safety and efficiency of systems processing the euro. In the case of an infrastructure located outside the euro area, the Eurosystem’s ability to oversee these systems and to detect risks that could jeopardise the performance of its abovementioned core tasks at an early stage is undermined due to a mismatch between public responsibilities and public powers. For instance, as highlighted by the ‘Eurosystem Oversight Policy Framework’ of February 2009 , cooperative oversight arrangements at international level can mitigate the loss of direct influence to some extent, but cannot ensure the same level of influence of the issuing central bank as direct oversight, especially in a crisis situation, where access to timely information by the issuing central bank may not be possible.

text: 3.3.2 Consequently, if such risks are not identified and addressed at an early stage, the malfunctioning of infrastructures located outside the euro area processing the euro could lead to spill-over effects to infrastructures within the euro area. Direct Eurosystem oversight, which is possible provided that infrastructures are located in the euro area, is key to ensuring the safety and efficiency of infrastructures processing the euro and thus to maintaining ultimate control over the euro. 3.3.3 It is appreciated that the requirements that need to be met to obtain an authorisation to provide clearing and settlement services in or to the Netherlands will ensure that the clearing and settlement institutions do not constitute a risk to the investors’ interests and to financial stability in general. DNB grants the authorisation. These requirements are to ensure the safety and efficiency of the systems in question. 3.3.4 Furthermore, under the draft law an authorisation is required to provide clearing and settlement services in the Netherlands to participants with whom the clearing and settlement institution is not affiliated in a group by providing these services to the Netherlands. This does not prevent these services from being provided from outside the euro area, including through a branch outside the Netherlands. Considering that clearing and settlement institutions are vital in ensuring and promoting the stability of the financial system, the ECB considers that the Eurosystem’s direct oversight over infrastructures processing transactions in euro is crucial and that the need for this is also more necessary as the draft law does not directly address crisis management. 3.3.5 Consequently, the ECB is of the view that the possibility for clearing and settlement institutions not located in the euro area to provide services processing the euro, without requiring the Eurosystem to have sufficient means to ensure their safety, has the potential of undermining the Eurosystem’s control over the euro and the proper performance of its core tasks. 3.3.6 Finally, the ECB reiterates its advice in Opinion

text: , and also in Opinion

text: , according to which oversight over payment systems, including market conduct, should be explicitly assigned to DNB in accordance with Article 105(2) of the Treaty and Article 22 of the ESCB Statute.

text: This opinion will be published on the ECB’s website.

text: Done at Frankfurt am Main, 26 October 2009.

text: [signed]

text: The President of the ECB

text: Jean-Claude TRICHET


text: OJ L 189, 3.7.1998, p. 42.

text: See ECB Opinion

text: . All ECB opinions are published on the ECB’s website at www.ecb.europa.eu. 3 See the ECB’s Convergence Report May 2008, p. 21.

text: Opinion

text: , paragraph 2.1.

text: Opinion

text: , paragraph 2.1.

text: Opinion

text: , paragraph 2.3; and Opinion

text: , paragraph 2.2.

text: Opinion

text: , paragraph 3.2.

title: Opinion of the European Central Bank of 27 October 2009 on Národná banka Slovenska’s independence (CON/2009/85)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 27 October 2009 on Národná banka Slovenska’s independence (

text: ) Introduction and legal basis

text: On 20 October 2009 the European Central Bank (ECB) received a request from the National Council of the Slovak Republic for an opinion on draft amendments to Section VI of the draft law on payment services and on amendments to certain laws (hereinafter the ‘draft law’). Section VI of the draft law contains draft amendments to the Law on Národná banka Slovenska (NBS). The ECB’s competence to deliver an opinion is based on Article 105(4) of the Treaty establishing the European Community and the third indent of

text: Article 2(1) of Council Decision 98/415/EC of 29 June 1998

text: on the consultation of the European Central Bank by national authorities regarding draft legislative provisions , as the draft law relates to NBS. In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.

text: 1. Purpose of the draft law

text: 1.1 The draft law introduces a provision on a possible transfer of NBS’ profit to the State budget or State financial assets. According to the draft provision, the Board may decide on a transfer of the profit balance or any part thereof to the State budget or State financial assets. 1.2 The draft law also provides for changes in the composition of the Board and the reappointment of its members. The number of Board members will be reduced from 11 to five, with this reduction concerning only Board members appointed by the Government. The number of Board members will be reduced gradually, as all current Board members will remain until the end of their term of office. The draft law will allow members of the Board to be reappointed without any limitation except the Governor and the Vice-Governor; under the current law, reappointment was limited to two consecutive terms of office. 1.3 The draft law also introduces a provision aiming to provide for continuity in the Governor’s office, with the Governor’s function and the term of office not ceasing before the effective date of the appointment of a new NBS Governor.

text: 2. General observations

text: 2.1 The statutes of national central banks (NCBs) and any amendments thereto must safeguard the independence of NCBs, thus ensuring the proper performance of their tasks under the Treaty and the Statute of the European System of Central Banks (hereinafter the ‘Statute of the ESCB’). The draft law contains amendments to the Law on Národná banka Slovenska (NBS) that concern personal and financial independence of the central bank. 2.2 With regard to personal independence, the amendments should safeguard the security of tenure and the minimum term of office of the Governor and of the other members of decision-making bodies involved in the performance of ESCB-related tasks. Article 14.2 of the Statute of the ESCB provides that the NCB statutes must provide for a minimum term of office of five years for the Governor; it also protects against the arbitrary dismissal of Governors, by providing that Governors may only be relieved from office if they no longer fulfil the conditions required for the performance of their duties or if they have been guilty of serious misconduct. 2.3 One of the features of financial independence that is most vulnerable to outside influence is the distribution of profits and the creation of financial provisions. With regard to profit allocation rules, an NCB’s statute may prescribe how profits are to be allocated. Moreover, even though amendments to such rules are possible, it is important to shield the rules related to the distribution of profits from third-party interests and to ensure a legal framework that provides a stable and longterm basis for the central bank’s functioning . Furthermore, any decision by NCB decision-making bodies on allocation of profits should be taken on professional grounds and should not be subject to the discretion of third parties unless there is an express safeguard clause stating that this is without prejudice to the financial means necessary for carrying out the ESCB or Eurosystem-related tasks . 2.4 With regard to financial provisions and buffers, as stressed by the ECB in its convergence reports, an NCB must be free to independently create financial provisions to safeguard the real value of its capital and assets.

text: 3. Personal independence

text: The new wording of

text: Article 7(8)

text: (a) and

text: Article 7(8)

text: (b) provides that the office of the Governor may cease only when a new Governor has been appointed. The ECB understands that this new provision is intended to fill the gap between expiry of the Governor’s five year term office or resignation from office, and appointment of a new governor subject to Article 7(4) of the Law on NBS. The wording of this provision might lead to a different interpretation, whereby the office of the Governor will cease when a new governor is appointed, whenever this will happen, i.e. even before expiry of the five year term of office, or before resignation. In order to avoid any possible misinterpretation that could lead to breach of Article 14.2 of the Statute of ESCB, rewording of this provision should be considered.

text: 4. Financial independence

text: 4.1 Each Member State is obliged to safeguard their NCB’s financial independence, thus ensuring the proper performance of its tasks under the Treaty and the Statute of the ESCB . In particular, the compatibility of the Law on NBS with the central bank independence requirements of Article 108 of the Treaty and the Statute of the ESCB is of utmost importance, as NBS’ primary objective of price stability is best served if it is a fully independent institution with a precisely defined mandate . 4.2 The ECB welcomes the new wording of Article 39(4) of the Law on NBS which stipulates that the profit balance of the NBS or any part thereof may be transferred to the State budget or to the State financial assets subject to a decision only by NBS’ Board and in accordance with the Law on the budgetary rules for public administration. 4.3 NCBs must have sufficient financial means to carry out their other functions at all times, i.e. they must be able to perform their national tasks, to meet their international obligations and to cover their administrative and operational expenses . The ECB understands that the new third sentence of Article 39(4) of the Law on NBS must be read in conjunction with the second sentence thereof, i.e. any NBS profit is first allocated to the reserve fund and other funds created from profit and is intended to cover an accumulated loss from previous years. In this context, it is understood that only once the accumulated losses from previous years have been covered may any profit balance be transferred to the State budget or to the State financial assets, following a decision by the Board. This mechanism is crucial to ensure NBS’ financial independence without weakening its financial means for implementing its monetary policy . The draft law should be reworded regarding paragraph 39(4) of the Law on NBS in this respect.

text: Done at Frankfurt am Main, 27 October 2009.

text: [signed]

text: The President of the ECB

text: Jean-Claude TRICHET


text: OJ L 189, 3.7.1998, p. 42.

text: Equity capital may also be redeemed if substituted with capital of equivalent or higher quality. 3 Directive

text: of the European Parliament and of the Council of 14 June 2006 relating to the taking up and pursuit of the business of credit institutions (recast) (OJ L 177, 30.6.2006, p. 1).

text: The amendment would allow the payment of dividends from ‘distributable profits’, i.e. net profits or losses for the year, rather than ‘profits or loss for the year after tax’, i.e. profits or losses before ‘changes in reserves’ and ‘profits or losses brought forward’.

title: Opinion of the European Central Bank of 28 October 2009 on measures to improve liquidity and increase the competitiveness of credit institutions (CON/2009/86)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 28 October 2009 on measures to improve liquidity and increase the competitiveness of credit institutions (

text: ) Introduction and legal basis

text: On 14 October 2009, the European Central Bank (ECB) received a request from the Austrian Ministry of Finance for an opinion on a draft Federal law amending the Austrian Banking Act and the Securities Supervision Act (hereinafter the ‘draft law’). The ECB’s competence to deliver an opinion is based on Article 105(4) of the Treaty establishing the European Community and the sixth indent of

text: on the consultation of the European Central Bank by national authorities regarding draft legislative provisions , as the draft law relates to rules applicable to financial institutions insofar as they materially influence the stability of financial institutions and markets. The consulting authority has informed the ECB that the draft law will enter into force on 1 January 2010 and that, due to the legislative schedule of the Austrian Parliament, the ECB has been asked to deliver its opinion by 23 October 2009. This implies that the consulting authority is invoking the exemption under

text: Article 3(2) of Council Decision 98/415/EC

text: , which allows for a reduction of the minimum time limit for consultation of one month only in case of extreme urgency. In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.

text: 1. Purpose of the draft law

text: 1.1 According to the explanatory note of the consulting authority, the main purpose of the draft law is to introduce measures aimed at improving liquidity and to increase the competitiveness of credit institutions. 1.2 The measures contained in the draft law are expected to have anti-cyclical effects to be achieved as follows.  Interest on supplementary capital is only to be paid out in so far as it is covered by the distributable profits (whereas currently it may be paid out if it is covered by the profit for the year after tax, i.e. before the allocation of reserves).

text:  In order to strengthen their liquidity, Austrian credit institutions are to be entitled to include (reverse) repurchase agreements with an option to resell (unechte Pensionsgeschäfte) as second class liquidities.  The draft law will also allow credit institutions to redeem individual tranches of participation capital, provided they were identified at the time of issuance . This provision is intended to facilitate the redemption of participation capital provided to credit institutions by the Federal Government in accordance with the recapitalization scheme of the Financial Stability Act (FinStaG).  Based on the agreement of the Member States in the Council’s Working Group on Financial Services in October 2009, the transitional floors for credit institutions or groups of credit institutions that apply the internal ratings based approach (hereinafter the ‘IRB approach’), as referred to in Article 152 of the Capital Requirements Directive (CRD) , are to be extended until 31 December 2011. 1.3 The draft law also amends the supervisory procedure for the IRB approach and the models for groups of credit institutions, provided that parent and subsidiary banks consistently and jointly fulfil the approval requirements. In such cases, the Austrian Financial Market Authority may restrict its assessment to the parent credit institution provided such an approach is appropriate. 1.4 In addition, a minor amendment to the Securities Supervision Act 2007 is proposed. In future, only investment companies, but not credit institutions, will be required to disclose their fixed overheads in their annual accounts.

text: 2. General observations

text: 2.1 The ECB understands that the draft law is intended to enhance the liquidity framework of credit institutions, extend the provisions for transitional floors, and mitigate procyclical effects. 2.2 The ECB notes that work is under way at international and European levels with a view to strengthening the global capital framework by building stronger buffers into the financial system, covering capital, liquidity and provisioning, that will constrain the procyclical build-up of leverage in the system. The ECB takes the view that the initiatives of national governments to mitigate procyclicality should be aligned with the outcome of this work. 2.3 The ECB also notes that the CRD is currently being reviewed and amended at European level. It may therefore be necessary to align the draft law with the amended CRD. .

text: 3. Specific observations

text: 3.1 The ECB acknowledges that allowing the redemption of individual tranches of participation capital, provided they are identified at the time of issuance, could contribute to limiting the duration and scope of recapitalisation schemes, and thus retain the temporary nature of the government’s involvement in financial support schemes. 3.2 The ECB acknowledges the need to ensure international fair competition for the treatment of dividends paid on supplementary capital. However, as far as the stated objective of mitigating procyclicality is concerned, the amendment to

text: Article 23(7)

text: No 2 would only have the intended counter-cyclical effects if credit institutions set aside annual profits in good times to be drawn on in times of economic stress, when annual profits may easily turn into losses and capital buffers are needed to absorb these losses. Yet, given that credit institutions often follow stable dividend policies, the proposed amendment may provide an incentive to credit institutions to distribute dividends on supplementary capital in excess of the ‘profit or loss for the year after tax’, simply by drawing on profits brought forward or on reserves built up in previous periods. Therefore, the ECB sees the risk that, in practice, the proposed amendment could lead to results contrary to those intended if credit institutions were allowed to reduce their capital base by paying out stable dividends. Mitigating procyclicality by introducing prudential requirements should rather aim to give credit institutions incentives to maintain their lending activity also in times of stress.

text: Done at Frankfurt am Main, 28 October 2009.

text: [signed]

text: The President of the ECB

text: Jean-Claude TRICHET


text: OJ L 189, 3.7.1998, p. 42. 2 Published in Magyar Közlöny 2001/76 (VII. 5.).

text: Decision ECB/2003/4 of 20 March 2003 on the denominations, specifications, reproduction, exchange and withdrawal of euro banknotes (OJ L 78, 25.3.2003, p. 16).

title: Opinion of the European Central Bank of 29 October 2009 on extending the deadline for submitting certain banknotes to be exchanged (CON/2009/87)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 29 October 2009 on extending the deadline for submitting certain banknotes to be exchanged (

text: ) Introduction and legal basis

text: On 12 October 2009, the European Central Bank (ECB) received a request from the Magyar Nemzeti Bank (MNB) for an opinion on a draft regulation recalling certain notices on the withdrawal of banknotes from circulation (hereinafter the ‘draft regulation’). The ECB’s competence to deliver an opinion is based on Article 105(4) of the Treaty establishing the European Community and the second indent of

text: Article 2(1) of Council Decision 98/415/EC of 29 June 1998

text: on the consultation of the European Central Bank by national authorities regarding draft legislative provisions , as the draft regulation relates to means of payment. In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.

text: 1. Purpose of the draft regulation

text: The purpose of the draft regulation is to extend the deadline for submitting certain forint banknotes withdrawn from circulation for exchange by the MNB. In particular, the draft regulation intends to extend the deadline for submitting 500 and 1 000 forint banknotes withdrawn from circulation until 1 September 2019, and 5 000 forint until 27 July 2019.

text: Article 31(1)

text: and (3) of Law LVIII of 2001 on the Magyar Nemzeti Bank forms the legal basis for the draft regulation on extending the exchangeability deadline. Furthermore, the draft regulation recalls several notices regulating the withdrawal and exchange of forint banknotes withdrawn from circulation issued between 1998 and 2001 by the MNB’s Governor.

text: 2. General observations

text: 2.1 The ECB welcomes the MNB’s use of a regulation to extend the deadline for submitting for exchange forint banknotes withdrawn from circulation as it provides greater legal certainty than notices. The ECB understands that the draft regulation after its adoption will merely extend the

text: deadline for submitting forint banknotes withdrawn from circulation without affecting more general financial matters. 2.2 The ECB shares the view that the issue of banknotes belongs to core central banking tasks. In the case of the Eurosystem, the issue of euro banknotes is a public task attributed to the ECB and the Eurosystem national central banks by Article 106(1) of the Treaty establishing the European Community and Article 16 of the Statute of the European System of Central Banks and of the European Central Bank. The ECB has legislated on certain aspects of the regime for the issue of euro banknotes with regard to (i) putting euro banknotes into circulation; (ii) taking individual banknotes out of circulation; and (iii) the withdrawal of types or series of banknotes from circulation which will have to be taken into account when Hungary adopts the euro .

text: This opinion will be published on the ECB’s website.

text: Done at Frankfurt am Main, 29 October 2009.

text: [signed]

text: The President of the ECB

text: Jean-Claude TRICHET