text: on the consultation of the European Central Bank by national authorities regarding draft legislative provisions (OJ L 189, 3.7.1998, p. 42).

text: Law on credit institutions (Закон за кредитните институции, обн. ДВ, бр. 59 от 21.07.2006 г.).

text: Regulation (EU) No 575/2013

text: of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending

text: Regulation (EU) No 648/2012

text: (OJ L 176, 27.6.2013, p. 1),

text: Regulation (EU) No 648/2012

text: of the European Parliament and of the Council of 4 July 2012 on OTC derivatives, central counterparties and trade repositories (OJ L 201, 27.7.2012, p. 1),

text: Regulation (EU) 2015/2365

text: of the European Parliament and of the Council of 25 November 2015 on transparency of securities financing transactions and of reuse and amending

text: Regulation (EU) No 648/2012

text: (OJ L 337, 23.12.2015, p. 1),

text: Regulation (EU) No 909/2014

text: of the European Parliament and of the Council of 23 July 2014 on improving securities settlement in the European Union and on central securities depositories and amending Directives

text: and

text: and

text: Regulation (EU) No 236/2012

text: (OJ L 257, 28.8.2014, p. 1) and

text: Commission Regulation (EU) No 1031/2010 of 12 November 2010

text: on the timing, administration and other aspects of auctioning of greenhouse gas emission allowances pursuant to Directive

text: of the European Parliament and of the Council establishing a scheme for greenhouse gas emission allowances trading within the Community (OJ L 302, 18.11.2010, p. 1).

text: See

text: Council Regulation (EU) No 1024/2013 of 15 October 2013

text: conferring specific tasks on the European Central Bank concerning policies relating to the prudential supervision of credit institutions (OJ L 287, 29.10.2013, p. 63). Under

text: Article 18(5) of Regulation (EU) No 1024/2013

text: , in the cases not covered by

text: Article 18(1) of Regulation (EU) No 1024/2013

text: , where necessary for the purpose of carrying out the tasks conferred on it by that Regulation, the ECB may require national competent authorities to open proceedings with a view to taking action in order to ensure that appropriate penalties are imposed in accordance with the acts referred to in the first subparagraph of

text: Article 4(3)

text: and any relevant national legislation which confers specific powers which are currently not required by Union law. The penalties applied by national competent authorities shall be effective, proportionate and dissuasive. This provision shall be applicable in particular to pecuniary penalties to be imposed on credit institutions, financial holding companies or mixed financial holding companies for breaches of national law transposing relevant Directives, and to any administrative penalties or measures to be imposed on members of the management board of a credit institution, financial holding company or mixed financial holding company or any other individuals who under national law are responsible for a breach by a credit institution, financial holding company or mixed financial holding company.

text: Regulation (ЕU) No 575/2013, Regulation (ЕU) No 648/2012, Regulation (ЕU) 2015/2365, Regulation (ЕU) No 909/2014 or Commission Regulation (ЕU) No 1031/2010.

text: Law on BNB (Закон за Българската народна банка, обн. ДВ, бр. 46 от 10.06.1997 г.). 7 See

text: Council Regulation (EC) No 2866/98 of 31 December 1998

text: on the conversion rates between the euro and the currencies of the Member States adopting the euro (OJ L 359, 31.12.1998, p.1). 8 Resolution of the European Council on the establishment of an exchange-rate mechanism in the third stage of economic and monetary union Amsterdam, 16 June 1997 (OJ C 236 2.8. 1997, p. 5). 9 Agreement of 16 March 2006 between the European Central Bank and the national central banks of the Member States outside the euro area laying down the operating procedures for an exchange rate mechanism in stage three of Economic and Monetary Union (OJ C 073 25.3.2006, p. 21).

text: Decision ECB/2014/5 of the European Central Bank of 31 January 2014 on the close cooperation with the national competent authorities of participating Member States whose currency is not the euro (OJ L 198, 5.7.2014, p. 7). 11 See paragraph 2.3 of Opinion

text: . All ECB Opinions are published on the ECB’s website at www.ecb.europa.eu. 12

text: Regulation (EU) No 468/2014

text: of the European Central Bank of 16 April 2014 establishing the framework for cooperation within the Single Supervisory Mechanism between the European Central Bank and national competent authorities and with national designated authorities (SSM Framework Regulation) (ECB/2014/17) (OJ L 141, 14.5.2014, p. 45).

title: Opinion of the European Central Bank of 30 January 2020 on the sanctioning powers of BNB within close cooperation and the official exchange rate of the Bulgarian lev (CON/2020/5)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 30 January 2020 on the sanctioning powers of BNB within close cooperation and the official exchange rate of the Bulgarian lev (

text: ) Introduction and legal basis

text: On 21 January 2020 the European Central Bank (ECB) received a request from Българска народна банка (Bulgarian National Bank, BNB), following correspondence exchanged between BNB and the Bulgarian Minister of Finance, for an opinion on a draft law amending the Law on credit institutions and the Law on BNB (hereinafter the ‘draft law’). The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the Functioning of the European Union and the first and third indents of

text: , as the draft law relates to currency matters, BNB and the tasks conferred on the ECB concerning the prudential supervision of credit institutions pursuant to Article 127(6) of the Treaty. 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: As explained in the consultation letter, the draft law serves a two-fold purpose in relation to the Republic of Bulgaria’s intention to join the Single Supervisory Mechanism (SSM) and the Exchange Rate Mechanism (ERM II). 1.1 Draft provisions relating to sanctions in the context of banking supervision The draft law proposes to amend the Law on credit institutions in relation to BNB’s sanctioning powers, both in general terms as well as in relation to ECB instructions in the context of close cooperation. 1.1.1 Proposed changes to the general sanctioning provisions The draft law extends the list of breaches which may be subject to sanctions, as set out in Article 152(1) of the Law on credit institutions, to also include breaches of other relevant directly applicable acts of the European Union, in addition to the existing list of breaches of certain specific

text: Union legal acts , of the Law on credit institutions, and of normative acts issued for their

text: application.

text: (5) and (7) of

text: Council Regulation (EU) No 1024/2013

text: The draft law proposes to amend

text: Article 121

text: d of the Law on credit institutions, which is contained

text: in Chapter 11a on close cooperation with the ECB, in order to provide explicitly for the different

text: scenarios in which BNB is required to follow ECB requests in relation to administrative penalties in

text: the context of close cooperation.

text: On the one hand, in the event of requests issued by the ECB, BNB is required to impose a financial penalty for a breach of Regulation (ЕU) No 575/2013 or other directly applicable Union acts by a

text: credit institution, financial holding company or mixed financial holding company or for a breach or

text: non-compliance by a credit institution, financial holding company or mixed financial holding

text: company with an administrative act issued under

text: Article 121

text: b.

text: Council Regulation (EU) No 1024/2013

text: , BNB is required to begin a procedure for the imposition of

text: administrative sanctions. Also, if BNB establishes a breach of specific Union legal acts , of other

text: relevant directly applicable Union legal acts, or of a normative act issued for their application, or of

text: an individual administrative act issued under the Law on credit institution, the person committing

text: to (3) of the Law on credit institutions.

text: Furthermore, the draft law expands the duty of BNB to adopt a sanction on the basis of Article 152(6) of the Law on credit institutions in response to requests made by the ECB in relation to all possible tasks listed in

text: Article 121

text: b, namely in relation to significant institutions, less significant institutions and macro-prudential tasks. 1.1.3 Statute of limitations for opening a sanctioning proceeding Finally, the draft law specifies that statements of objections shall be drawn up by officials authorised by the Deputy Governor of BNB heading the Banking Supervision Department within five years of the date of the breach and, in case of continued infringement, within five years of the date on which the infringement ceased. 1.2 Draft provision relating to ERM II 1.2.1 Current framework for the exchange rate between the lev and the euro The Republic of Bulgaria has in place a currency board arrangement with a fixed exchange rate between the lev and the euro. In particular, Article 29 of the Law on BNB , currently in force, provides that the official exchange rate of the lev shall be 1 lev per 1 Deutsche Mark, and that once the euro becomes legal tender in the Federal Republic of Germany, the official exchange rate of the lev to the euro shall be determined by multiplying that exchange rate by the official exchange rate of conversion of the Deutsche Mark to the euro . 1.2.2 Proposed amendments to the current framework for the exchange rate between the lev and the

text: euro

text: The draft law proposes to supplement the existing provision on the exchange rate between the lev and the euro with a provision establishing that from the date of participation of the Republic of Bulgaria in ERM II, the official exchange rate of the lev to the euro shall be equal to the central rate between the lev and the euro, as agreed per paragraph 2.3 of the Resolution of the European Council on the establishment of an exchange-rate mechanism in the third stage of economic and monetary union Amsterdam, 16 June 1997 (Resolution on ERM II) and Articles 1.1 and 17.1 of the Agreement of 16 March 2006 between the ECB and the national central banks of the Member States outside the euro area laying down the operating procedures for an exchange rate mechanism in stage three of Economic and Monetary Union (ERM II Central Bank Agreement).

text: 2. General observations

text: 2.1 The draft law seeks to ensure that BNB will be able to adopt any measure requested by the ECB in relation to supervised entities, as required under the legal framework regulating close cooperation between the ECB and BNB.

text: 2.2 In this regard it is highlighted that this opinion is without prejudice to the overall assessment of the request filed on 18 July 2018 by the Republic of Bulgaria to establish close cooperation between the ECB and BNB, which is taking place in line with the existing procedures established under

text: Article 7 of Regulation (EU) No 1024/2013

text: and under Decision ECB/2014/5 of the European Central Bank . In particular, this opinion remains without prejudice to the assessment being conducted by the ECB in accordance with Article 4 of Decision ECB/2014/5, which includes a broader assessment of the relevant national legislation, also taking into account the practical implementation of such legislation .

text: 3. Specific observations

text: 3.1 Draft provisions relating to the sanctions in the context of banking supervision 3.1.1 The ECB welcomes that the draft law further refines the sanctioning powers for BNB in order to fully align Bulgarian national law with the scope of the ECB’s sanctioning power under

text: Article 18 of Regulation (EU) No 1024/2013

text: . 3.1.2 In particular the ECB welcomes that the draft law requires BNB to comply with all ECB requests for the sanctioning of breaches of BNB administrative acts issued pursuant to ECB requests mentioned in paragraphs 1 to 4 of

text: Article 121

text: b of the Law on credit institutions. 3.1.3 In addition the ECB welcomes that the draft law explicitly mentions that BNB shall open proceedings for the imposition of administrative penalties when so requested by the ECB on the basis of

text: , in line with the obligations set forth under

text: Article 121

text: b of the Law on credit institutions. Moreover, the ECB welcomes that the draft law clarifies by means of cross-reference which administrative penalties may be imposed by BNB when it is acting upon an ECB request made on the basis of

text: . 3.1.4 The ECB welcomes that the draft law aligns the statute of limitations when BNB acts upon a request from the ECB with the time limits set out in

text: Article 4

text: c of

text: Council Regulation (EU) No 2532/98

text: and

text: Article 130 of Regulation (EU) No 468/2014

text: of the European Central Bank (ECB/2014/17) , namely five years after the breach occurred or, in case of a continued infringement, five years after the infringement ceased.

text: 3.2 Draft provision relating to ERM II The ECB welcomes the new provision of Article 29(3) of the Law on BNB, which is in line with the procedures under the ERM II Resolution and the ERM II Central Bank Agreement. This opinion will be published on the ECB’s website. Done at Frankfurt am Main, 30 January 2020. [signed]

text: The President of the ECB

text: Christine LAGARDE


text: Bankwet 1998.

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

text: According to Article 13(6) of The Bank Act 1998, the Supervisory Board: (i) oversees the general course of business within DNB and the policy pursued by the Governing Board in the implementation of DNB’s tasks outside the framework of the ESCB, (ii) advises the Governing Board, and (iii) adopts the annual accounts with the approval of the Dutch State as DNB’s sole shareholder.

text: According to

text: Article 15(1)

text: , (2) and (5) of The Bank Act 1998, the Bank Council is an internal body of DNB. The Governor of DNB reports to the Bank Council about general economic and financial developments and discusses the policy of DNB.

text: Articles 12

text: to 12b of The Bank Act 1998.

text: Decree by the Minister of Finance of 2 November 2012 for establishment of the Financial Stability Committee (Netherlands Government Gazette (Stcrt.) 2012, no 22730).

text: This is evidenced by limiting the Supervisory Board’s role to Article 4 of The Bank Act 1998, whereas the ESCBrelated tasks of DNB are laid down in Articles 2, 3 and 7 of The Bank Act 1998.

text: See paragraph 2.3 of Opinion

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

publisher: Europeiska centralbanken

sprak: en

title: Opinion of the European Central Bank of 31 January 2020 on changes to the governance of De Nederlandsche Bank and the formal establishment of the Financial Stability Committee (CON/2020/6)

serie: con

text: OPINION OF THE EUROPEAN CENTRAL BANK of 31 January 2020 on changes to the governance of De Nederlandsche Bank and the formal establishment of the Financial Stability Committee (

text: ) Introduction and legal basis

type: rubrik

text: On 20 December 2019 the European Central Bank (ECB) received a request from the Minister for Finance of the Netherlands for an opinion on a draft law on the amendment of The Bank Act 1998 (hereinafter the ‘draft law’). The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the Functioning of the European Union and the third indent of

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

text: , 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 ECB, the Governing Council has adopted this opinion.

type: stycke

text: 1. Purpose of the draft law

text: 1.1 The draft law introduces changes to the internal procedures for the nomination and appointment of 3 4 the members of the Executive Board, Supervisory Board and Bank Council of DNB. In addition, the draft law strengthens the current legal basis for the existing Financial Stability Committee (FSC). 1.2 Under the existing provisions of The Bank Act 1998, the President of DNB and the other three to five members of the Executive Board of DNB, which is the main decision-making body responsible for the management of DNB, are appointed by the Crown for a term of seven years. The existing provisions provide that the Supervisory Board, after consulting the Executive Board, draws up a shortlist of three recommended persons with respect to every such appointment of the Executive Board and of the Supervisory Board. The draft law amends these provisions to clarify that the shortlist shall comprise ‘in principle’ three persons. 1.3 As explained in the Explanatory Note to the draft law, the inclusion of the phrase ‘in principle’ in certain provisions encourages a situation in which multiple individuals are considered for a position

text: and can therefore contribute towards enhancing diversity in the composition of the respective body. The idea behind the change is that in exceptional cases it can be difficult to find a sufficient number of suitable candidates that are available for the position. This could be the case where the position is demanding and requires a very specific job profile in which specialist knowledge must be combined with extensive managerial experience. For this reason, the draft law introduces the phrase ‘in principle’ in order to allow a deviation from the standard, if necessary. In the event that a list contains fewer than the number of candidates that ‘in principle’ is required, the bylaws of DNB will require that the statement of reasons accompanying the list explicitly gives the reasons for this. 1.4 Under the existing provisions of The Bank Act 1998 and the bylaws of DNB, the four-year term of the members of the Supervisory Board may be renewed twice . Under the draft law it is clarified that reappointments to the Supervisory Board may take place in accordance with the bylaws of DNB, and that the list for each vacancy drawn up by the Supervisory Board shall include ‘in principle’ three nominees (currently this list should include exactly three nominees), as outlined in paragraph 1.3 of this opinion. According to the Explanatory Note to the draft law, the bylaws of DNB will be amended in the light of the draft law so as to comply with the amended Dutch Corporate Governance Code with regard to the period of office of Supervisory Board members. Although the Code applies to listed companies, DNB voluntarily applies the Code, and, as a result, in the future a Supervisory Board member will serve a maximum of two terms of four years and two terms of two years. 1.5 Under the existing provisions of The Bank Act 1998, nine to eleven out of the eleven to thirteen members of the Bank Council of DNB are appointed by the Bank Council for renewable terms of four years, each from a shortlist of two persons for each vacancy drawn up by the Executive Board. The draft law clarifies that this shortlist comprises ‘in principle’ two persons, as outlined in paragraph 1.3 of this opinion. 1.6 The draft law provides for a FSC, in which representatives of DNB, the Authority for the Financial Markets, the Netherlands Bureau for Economic Policy Analysis (NBEPA) and the Ministry of Finance shall hold discussions and exchange information concerning macroeconomic and financial developments with the objective of identifying risks to the stability of the financial system and suggesting possible approaches to solve or mitigate those risks. The FSC shall have the power to make recommendations in that regard. The FSC shall publish its recommendations unless publication could pose a risk to the stability of the financial system. The representatives of the NBEPA and the Ministry of Finance shall not take part in the decision-making process leading to the establishment of recommendations. The FSC shall meet at least twice a year and shall be chaired by the President of DNB. An account of those meetings shall be issued to the Minister for Finance, who will in turn send copies of the minutes and the FSC’s recommendations to both Houses of the Dutch Parliament. 1.7 As noted in the Explanatory Note to the draft law, the FSC was established in 2012. At present, the FSC is established under a Ministerial Decree issued by the Minister for Finance . The draft law

text: intends to provide the FSC with a legal basis in primary legislation (in The Bank Act 1998) in order to do justice to the importance of the FSC, further to recommendations by the Financial Stability Board (FSB) and the International Monetary Fund (IMF).

text: 2. Observations

text: 2.1 The ECB understands that the Executive Board of DNB is responsible for the performance of the DNB’s ESCB-related tasks. The ECB takes note of the explanation in the Explanatory Note to the draft law that the increased flexibility as to the number of nominees for the Executive Board is motivated by practical considerations. This does not constitute a major change, and does not conflict with the principle of central bank independence under Article 130 of the Treaty. 2.2 The ECB understands that the Supervisory Board and Bank Council of DNB are expressly excluded from the performance of the ESCB-related tasks of DNB . Nevertheless, and as a general remark, neither the Supervisory Board nor the Bank Council may seek to influence the Executive Board of DNB in the exercise of any of its ESCB-related tasks. Under Article 130 of the Treaty, when exercising its powers and carrying out the tasks and duties conferred upon it by the Treaty and the ESCB Statute, neither a national central bank, nor any member of its decision-making bodies shall seek or take instructions from, inter alia, any government of a Member State ‘or from any other body’, which includes statutory bodies such as the Supervisory Board or the Bank Council of DNB . 2.3 Regarding the FSC, the main purpose of the draft law is to establish its legal basis in primary legislation. The draft law will also make NBEPA a full member of the FSC. The ECB welcomes that the Netherlands will strengthen the legal basis of the FSC, and thereby strengthen the FSC’s role in identifying risks to the stability of the financial system and making recommendations in that regard. This is also in line with the recommendations of the FSB and the IMF. 2.4 The draft law does not materially alter the FSC’s mandate or tasks. It does not confer any new tasks on DNB. Therefore, the issue of assessing whether the conferral of new tasks on a national central bank complies with the prohibition of monetary financing does not arise in the case at hand.

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

text: Done at Frankfurt am Main, 31 January 2020.

text: [signed]

text: The President of the ECB

text: Christine LAGARDE

type: vagledning

utgivare: ecb


text: Eesti Panga seaduse muutmise eelnõu SE 97 II. The draft law discussed in this opinion is based on the draft law as presented to the Estonian Parliament for a second reading.

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

text: See Section 11(3) of the Law on Eesti Pank. 10 See Section 11(4) of the Law on Eesti Pank. 11 See Sections 6, 8(1) and 8(5) of the Law on Eesti Pank. 12 See Section 1 of the draft law. 13 See Sections 4 and 5 of the draft law. 14 See Section 5 of the draft law. 15 See Sections 2 and 8 of the draft law. 16 See Section 3 of the draft law. 17 See Section 6 of the draft law.

text: See Section 7 of the draft law. 19 See Section 10 of the draft law. 20 See Section 8 of the draft law. 21 See Section 11 of the draft law. 22 See Section 12 of the draft law. 23 See Section 11(1)(1) of the Law on Eesti Pank.

text: See Section 10(3) of the Law on Eesti Pank. 25 See paragraph 6 of Opinion

text: and paragraph 2.3 of Opinion

text: . All ECB opinions are published on the ECB’s website at www.ecb.europa.eu. 26 See the ECB Convergence Report (May 2018), p. 22. 27 See the ECB Convergence Report (May 2018), p. 25. 28 See Section 9(1)(6) of the Law on Eesti Pank and Section 19(4) of the Charter of Eesti Pank. 29 See the ECB Convergence Report (May 2018), p. 26. 30 See Section 11(1)(7) of the Law on Eesti Pank. 31 See Section 9(2)(8) of the Law on Eesti Pank. 32 See the ECB Convergence Report (May 2018), p. 27.

text: 34 Executive Board , comprising the Governor and two Deputy Governors , and then submitted to the Supervisory Board for approval. In this respect, it is noted that the Deputy Governors are independent in the performance of their functions, are appointed by the Supervisory Board on a proposal from the Governor of Eesti Pank for a term of five years, and may only be removed from office on the grounds specified in Article 14.2 of the Statute of the ESCB . In addition, as noted in paragraph 2.4, the Governor of Eesti Pank is exclusively responsible for the performance of Eesti Pank’s ESCB-related tasks. 2.6 Regarding the Supervisory Board’s competence with respect to the allocation of profits, an NCB’s statutes may prescribe how its profits are to be allocated. In the absence of such provisions, decisions on the allocation of profits should be taken by the NCB’s decision-making bodies 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 NCB’s ESCB-related tasks as well as national tasks. As regards financial provisions or buffers, NCBs must be free to independently create financial provisions to safeguard the real value of their capital and assets. Member States may also not hamper NCBs from building up their reserve capital to a level which is necessary for a member of the ESCB to fulfil its tasks . As noted above, the Governor of Eesti Pank is exclusively responsible for the performance of Eesti Pank’s ESCB-related tasks. It would be useful to clarify the Governor’s responsibility in this respect by explicitly specifying that the Supervisory Board’s competences regarding the distribution of Eesti Pank’s profits and losses are without prejudice to the financial means necessary for carrying out Eesti Pank’s ESCB-related and national tasks. 2.7 Regarding the Supervisory Board’s competence in staffing matters, in particular so far as concerns the appointment and removal of the heads of Eesti Pank’s autonomous divisions, branch offices, the head of the internal audit department and internal auditors, the ECB has noted that the Member States may not impair an NCB’s ability to employ and retain the qualified staff necessary for the NCB to perform independently the tasks conferred on it by the Treaty and the Statute of the ESCB . In this respect the ECB notes that there are several statutory safeguards. As previously noted, the Governor of Eesti Pank is exclusively responsible for the performance of Eesti Pank’s ESCB-related tasks. The ECB understands that this also encompasses staffing matters and would allow the Governor to fulfil Eesti Pank’s ESCB-related tasks independently also in cases where the Supervisory Board declines to appoint relevant personnel under the Law on Eesti Pank. 2.8 In relation to the internal audit function, regardless of the right of the Supervisory Board to nominate the internal auditors and the head of the audit department , candidates are proposed either by the Governor of Eesti Pank, who proposes the candidates for the head of the internal audit function, or by the Head of the internal audit function him or herself with regard to internal

text: See Section 7(1)(4) of the Charter of Eesti Pank. 35 See Sections 10(2¹), 10(3) and 12(2) of the Law on Eesti Pank. 36 See the ECB Convergence Report (May 2018), pp. 27-28. 37 See the ECB Convergence Report (May 2018), p. 28. 38 See Sections 9(1)(4) and 9(1)(7) of the Law on Eesti Pank.

text: See Section 11(1)(6) of the Law on Eesti Pank and Section 5.3 of the Charter of the Internal Audit Department of Eesti Pank. 40 See Section 11(1)(6) of the Law on Eesti Pank. 41 See Section 5 of the draft law. 42 See Section 10 of the draft law. 43 See Section 11 of the draft law.

title: Opinion of the European Central Bank of 5 February 2020 on the Supervisory Board of Eesti Pank (CON/2020/7)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 5 February 2020 on the Supervisory Board of Eesti Pank (

text: ) Introduction and legal basis

text: On 31 December 2019 the European Central Bank (ECB) received a request from the Finance Committee of the Estonian Parliament for an opinion on a draft law amending the Law on Eesti Pank (hereinafter the ‘draft law’). The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the Functioning of the European Union and the third indent of

text: , as the draft law relates to Eesti Pank. 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 revises the composition of the Supervisory Board of Eesti Pank and the conditions and requirements applicable to its members.

text: Role and composition of Supervisory Board of Eesti Pank under current law.

text: 1.2 Under the current Law on Eesti Pank, the Supervisory Board of Eesti Pank exercises oversight over all the activities of Eesti Pank . The Law on Eesti Pank entrusts the following tasks to the Supervisory Board : 1) making proposals to the President of the Republic of Estonia concerning the appointment of the Governor of Eesti Pank; 2) appointing to or releasing from office Eesti Pank’s: (i) Deputy Governors; (ii) heads of autonomous divisions or branch offices; and (iii) head of the internal audit department, proposals for these decisions are to be made by the Governor of Eesti Pank; 3) appointing to office and removing from office members of the Supervisory Board of the Estonian Financial Supervision Authority (Finantsinspektsioon) and members of the Fiscal Council (eelarvenõukogu), on a proposal from the Governor of Eesti Pank;

text: 4) approving Eesti Pank’s Statute, the Charter of the Fiscal Council, the charters of Eesti Pank’s independent divisions and branch offices and the constitutive regulations of Eesti Pank’s internal audit department; 5) overseeing the implementation of Eesti Pank’s budget; 6) appointing Eesti Pank’s internal auditors and approving the work schedule of the internal audit; 7) appointing independent auditors of Eesti Pank, as recommended by the ECB’s Governing Council and approved by the Council of the European Union, to monitor Eesti Pank’s activities during the fiscal year and to attest to the truth and accuracy of the annual report prepared by Eesti Pank; 8) approving Eesti Pank’s annual report on a proposal from the Governor of Eesti Pank; 9) making decisions, following the procedure laid down in Union legislation, on the design of the national side of new euro coins and on the nominal value and design of commemorative coins; 10) deciding, on a proposal from the Governor of Eesti Pank, on the establishment, reorganisation and liquidation of autonomous divisions of Eesti Pank; and 11) reviewing and approving written proposals and other documents to be submitted to the Estonian Parliament in Eesti Pank’s name. 1.3 In addition, under the current Law on Eesti Pank, regarding the distribution of Eesti Pank’s profits and losses, at least 25 % of annual profits are to be used to increase the base capital up to the amount determined by the Parliament. At least 25 % of annual profits are to be used to increase the reserve capital when the Supervisory Board so decides. After these allocations, part of the profits may be used, on a decision from the Supervisory Board, to create or increase dedicated capital funds and funds for specific purposes as provided in Eesti Pank’s Statute . 1.4 Moreover, the Supervisory Board receives, on a regular basis, information from the Governor of Eesti Pank concerning Estonia’s economy and monetary policy, the situation of the financial sector and the implementation of Eesti Pank’s budget . Meetings of the Supervisory Board are held in camera, unless decided otherwise by the Chairman of the Supervisory Board. Eesti Pank’s Governor and Deputy Governors participate in meetings of the Supervisory Board and have the right to speak. The Minister of the Republic of Estonia responsible for the area may participate in the meetings, subject to Article 130 of the Treaty . The Governor of Eesti Pank is responsible for making arrangements to implement the resolutions of the Supervisory Board . If the Governor does not agree with a Supervisory Board resolution, he or she reports this to the President of the Parliament within three working days and proposes to address an interpellation on the matter to the

text: Chairman of the Supervisory Board . The Governor of Eesti Pank reports to the Supervisory Board about his or her work on a regular basis . 1.5 Under the current Law on Eesti Pank, the Supervisory Board comprises the Chairman, who is appointed for a five-year term by the Estonian Parliament (Riigikogu) on a proposal from the President of the Republic of Estonia, and seven members appointed for a five-year term by the Estonian Parliament on a proposal from the Chairman of the Supervisory Board .

text: Changes to the Supervisory Board under the draft law.

text: 1.6 The draft law changes the composition of the Supervisory Board by providing that the Supervisory Board comprises the Chairman, representatives of each faction in the Estonian Parliament and four experts in the field . The draft law also revises the procedure for appointing Supervisory Board members by providing that the members of the Supervisory Board are appointed by the Estonian Parliament on a proposal from the Parliament’s Finance Committee. Under the draft law each faction in the Parliament is to nominate its representative, who must be a member of the Parliament, to the Finance Committee within four months of the respective faction being formed. The Chairman of the Supervisory Board is responsible for nominating the candidate experts in the field to the Parliament’s Finance Committee within four months of being appointed . The procedure for appointing the Chairman of the Supervisory Board remains unchanged. 1.7 The draft law also introduces a procedure for nominating candidate experts in the field should the Chairman of the Supervisory Board fail to nominate candidates: (i) to the Estonian Parliament by the specified deadline and in a manner prescribed by the draft law; or (ii) that are supported by a majority in the Parliament. In such cases, the Parliament’s Finance Committee may propose candidate experts in the field to the new Supervisory Board. 1.8 The draft law establishes restrictions whereby the Chairman of the Supervisory Board may be nominated for a maximum of two consecutive terms and the members may be appointed for a maximum of two consecutive memberships of the Supervisory Board . The draft law adds a requirement that the Chairman of the Supervisory Board must, among other things, have the knowledge and experience necessary for participating in and managing the work of the Supervisory Board . In addition, the draft law specifies that the members of the Supervisory Board must, among other things, have the knowledge and experience necessary for participating in the work of the Supervisory Board . 1.9 The draft law also specifies the term of office of the members of the Supervisory Board. In particular, the term of the members of the Supervisory Board who are experts in the field begins when the decision appointing the experts in the field enters into force and ends when the term of

text: the Chairman of the Supervisory Board expires. The term of a Supervisory Board member who represents a parliamentary faction begins when the decision appointing him or her enters into force and ends when his or her membership of the Parliament terminates or is suspended . To ensure continuity of the work of the Supervisory Board, the draft law establishes that the terms of the members of the Supervisory Board remain in force until new members are appointed . In the period from the termination of the mandate of outgoing members of the Supervisory Board to the start of the mandate of the new members of the Supervisory Board, the Supervisory Board must refrain, unless strictly necessary, from taking decisions on certain matters, such as proposing the appointment of a new Governor of Eesti Pank to the President of Estonia . 1.10 The draft law also provides for the removal from office of members of the Supervisory Board. In particular, the Estonian Parliament must remove the Chairperson or a member of the Supervisory Board from office immediately if: (i) he or she is convicted in a criminal matter; (ii) a bankruptcy ruling has entered into force or a prohibition on carrying out a business or engaging in an economic activity applies with respect to him or her; (3) he or she does not meet the requirements provided for in the Law on Eesti Pank, or if he or she has submitted false information regarding his or her compliance with such requirements; or (4) he or she has failed to perform the duties of a member of the Supervisory Board to a material extent, has damaged Eesti Pank’s interests, or there is any other good reason why the member of the Supervisory Board is unsuitable to perform his or her duties. The Parliament may also, on a proposal from a faction, remove the representative of the faction from the Supervisory Board if the representative leaves the faction . 1.11 The draft law contains transitional provisions with respect to the current Chairman and members of the Supervisory Board .

text: 2. Observations

text: Institutional independence

text: 2.1 Pursuant to Article 130 of the Treaty, when exercising the powers and carrying out the tasks and duties conferred on it by the Treaty and the Statute of the European System of Central Banks and of the European Central Bank (hereinafter the ‘Statute of the ESCB’), neither a national central bank (NCB), nor any member of its decision-making bodies, may seek or take instructions from, inter alia, any government of a Member State ‘or from any other body’, which includes a statutory body such as the Supervisory Board. The ECB understands that the Governor of Eesti Pank is exclusively responsible for the performance of ESCB-related tasks , and therefore qualifies as a decision-making body of Eesti Pank within the meaning of Article 130 of the Treaty. The ECB notes that the Law on Eesti Pank emphasises that the Governor of Eesti Pank is independent in the

text: performance of his or her functions . Furthermore, the ECB understands that the Supervisory Board does not intervene in the performance of ESCB-related tasks, nor in the decisions concerning those tasks, and that it therefore cannot be considered to be a decision-making body within the meaning of Article 130 of the Treaty. Therefore, having regard both to the structure of the Supervisory Board, as a constituent part of Eesti Pank, and to its tasks, the Supervisory Board may not seek to influence the Governor of Eesti Pank, in his or her capacity as Eesti Pank’s decisionmaking body responsible for the performance of Eesti Pank’s ESCB-related tasks . 2.2 Regarding the exchange of information with, and reporting to, the Supervisory Board by the Governor of Eesti Pank, the ECB notes that dialogue between an NCB and third parties, even when based on statutory obligations to provide information and exchange views, is compatible with central bank independence provided that: (i) this does not result in interference with the independence of the members of the NCB’s decision-making bodies; (ii) the special status of Governors in their capacity as members of the ECB’s decision-making bodies is fully respected; and (iii) confidentiality requirements resulting from the Statute of the ESCB are observed .

text: Financial independence

text: 2.3 Even if an NCB is fully independent from a functional, institutional and personal point of view, as guaranteed by the NCB’s statutes, its overall independence would be jeopardised if it could not autonomously avail itself of sufficient financial resources to fulfil its mandate and perform the ESCB-related tasks required of it under the Treaty and the Statute of the ESCB . 2.4 Regarding the Supervisory Board’s competence to oversee the implementation of and to comment on Eesti Pank’s budget , the ECB has noted that a third party having the power to influence an NCB’s budget is incompatible with financial independence unless the law provides a safeguard clause so that such a power is without prejudice to the financial means necessary for carrying out the NCB’s ESCB-related tasks . This requirement is satisfied as the budget of Eesti Pank is approved by the Governor of Eesti Pank, who, as already noted, is exclusively responsible for the performance of Eesti Pank’s ESCB-related tasks . The Supervisory Board’s role is advisory in nature and it has no capacity to approve or veto Eesti Pank’s budget. 2.5 Regarding the Supervisory Board’s competence to approve Eesti Pank’s annual report, which includes the annual accounts , the ECB has noted that the annual accounts should be adopted by the NCB’s decision-making bodies, assisted by independent accountants, and may be subject to ex post approval by third parties (e.g., the government or the parliament) . This requirement is materially satisfied by an arrangement whereby the annual accounts are drafted by Eesti Pank’s

text: auditors . Similarly, the Governor would propose the candidates for the heads of the autonomous divisions . The ECB understands this to mean that the Supervisory Board may not select the relevant person(s) itself and may only approve or reject a candidate. Together with the exclusive responsibility of the Governor of Eesti Pank for the performance of Eesti Pank’s ESCB related tasks, these safeguards sufficiently ensure Eesti Pank’s ability to employ and retain the qualified staff necessary for Eesti Pank to perform independently the tasks conferred on it by the Treaty and the Statute of the ESCB.

text: Legal certainty

text: 2.9 In the interest of legal certainty, the national legislator may wish to review the text of the draft law to ensure that the terminology used and processes provided for are sufficiently clear and could not be misinterpreted or lead to any ambiguity. 2.10 First, the draft law provides that the Finance Committee of the Parliament may propose for the parliamentary approval the candidates to the Supervisory Board who are experts in the field , if the Chairman of the Supervisory Board does not propose such candidates or the Chairman’s candidates fail to obtain the Estonian Parliament’s approval . However, the draft law does not provide for a similar process if the parliamentary factions either fail to nominate their representatives or if these candidates are rejected. The ECB understands this to mean that in such cases a faction would not have a representative on the Supervisory Board. It might, nevertheless, be helpful to clarify this point, for the sake of legal certainty. 2.11 Second, the draft law provides that in the event that the mandate of a member of the Supervisory Board terminates, the mandate of such member is nevertheless automatically extended until the entry into force of a decision appointing a new member to replace the incumbent . The draft law includes grounds for removing a member of the Supervisory Board from office when he or she is not suitable, e.g. in cases where a member is convicted in a criminal matter or a prohibition on business has been applied . The draft law should make it clear, for the avoidance of any doubt, that in such cases the term of office of the outgoing member does not extend until the appointment of a new member.

text: Done at Frankfurt am Main, 5 February 2020.

text: [signed]

text: The President of the ECB

text: Christine LAGARDE


text: HNB’s authority to consult the ECB is based on Article 39(1) of the Law on HNB, whereby HNB may require the Government of the Republic of Croatia to propose the enactment of laws concerning HNB to the Croatian Parliament. The Ministry of Finance is the proponent of the draft laws, which were approved by the Croatian Government on 23 January 2020 and were delivered on the same day to the Croatian Parliament for the next steps in the legislative process.

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

text: This opinion addresses those provisions of the draft laws that concern the institutional independence of HNB, the personal independence of its decision-making bodies, HNB’s international cooperation, HNB’s possible application of negative interest rates, the Republic of Croatia’s foreign reserves, HNB’s financial statements, general reserves, revaluation accounts, provisions for financial risks and profit and loss, HNB’s planning for the euro cash changeover, HNB’s anti-counterfeiting tasks, security checks of HNB employees and HNB’s calculation of the national reference rate of the average cost of financing the Croatian banking sector. The remaining provisions of the draft laws are addressed in a separate opinion.

text: See Articles 20 and 28 of the draft law on HNB (amending Articles 71 and 104 of the Law on HNB).

text: Guideline

text: (EU) 2016/2249

text: of the European Central Bank of 3 November 2016 on the legal framework for accounting and financial reporting in the European System of Central Banks (ECB/2016/34) (OJ L 347, 20.12.2016, p. 37).

text: See

text: Articles 16

text: (amending Article 60 of the Law on HNB) and 35(3) of the draft law on HNB; see also Explanation accompanying the draft law on HNB,

text: Article 16

text: , p. 30.

text: See Article 55 of the Law on HNB.

text: See Article 35 of the draft law on HNB.

text: See Article 14 of the draft law on HNB (amending Article 56 of the Law on HNB).

text: See Explanation accompanying the draft law on HNB,

text: Article 14

text: , p. 29. Under the existing provisions of the Law on HNB the surplus of income over expenditure or shortfall between income and expenditures of HNB shall be calculated for each financial year as the sum of net operating income (realised income) and net profit (or loss) from the value adjustment of balance sheet items to changes in the exchange rate or market prices (unrealised income), decreased by general administrative expenses and depreciation, as well as assets allocated to specific reserves. See Article 56 of the Law on HNB.

text: See Article 15 of the draft law on HNB (amending Article 57 of the Law on HNB).

text: Article 3

text: , p. 26.

text: See

text: Article 22

text: (amending

text: Article 76

text: ) and

text: Article 23

text: (introducing

text: Article 77

text: b) of the draft law on HNB.

text: Council Regulation (EC) No 1338/2001 of 28 June 2001

text: laying down measures necessary for the protection of the euro against counterfeiting (OJ L 181, 4.7.2001, p. 6);

text: Council Regulation (EC) No 1339/2001 of 28 June 2001

text: extending the effects of

text: Regulation (EC) No 1338/2001

text: laying down measures necessary for the protection of the euro against counterfeiting to those Member States which have not adopted the euro as their single currency (OJ L 181, 4.7.2001, p. 11).

text: See Article 23 of the draft law on HNB (introducing

text: Articles 76

text: a and 76b of the Law on HNB).

text: See Article 59 of the draft law on credit institutions (amending Article 306 of the Law on credit institutions).

text: See Explanation accompanying the draft law on credit institutions,

text: Article 59

text: , p. 55.

text: See ECB Convergence Report 2018, p. 177-178; ECB Convergence Report 2016, p. 169-170; see ECB Convergence Report 2014, p. 239-240.

text: See Article 2(2) of the ECB Accounting Guideline and paragraph 4 of Opinion

text: . All ECB Opinions are published on the ECB's website at www.ecb.europa.eu.

text: See paragraph 3.1.9 of Opinion

text: and paragraph 3.1 of Opinion

text: See ECB Convergence Report 2016, p. 27.

text: See ECB Convergence Report 2018, p. 27; paragraph 4.3 of Opinion

text: and paragraph 3.2.5 of Opinion

text: See ECB Convergence Report 2018, p. 25-26.

text: See Article 76 of the Law on HNB.

text: See HNB press release ‘The Croatian National Bank to take over the calculation and publication of the national reference rate (NRR)’, 13.1.2020, available at www.hnb.hr. 32

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 (OJ L 332, 31.12.1993, p. 1).

text: Article 123 of the Treaty also serves the objective of maintaining price stability and reinforces central bank independence.

text: See recital 1 of Guideline

text: (EU) 2019/1265

text: of the European Central Bank of 10 July 2019 on the euro short-term rate (€STR) (ECB/2019/19) (OJ L 199, 26.7.2019, p. 8), and paragraphs 2 and 3.2.4 of Opinion

text: . 35 See Guideline

text: (EU) 2019/1265

text: of the European Central Bank of 10 July 2019 on the euro short-term rate (€STR) (ECB/2019/19) (OJ L 199, 26.7.2019, p. 8). 36 See Recital 14 and

text: Article 2(2)

text: (a) of

text: Regulation (EU) 2016/1011

text: of the European Parliament and of the Council of 8 June 2016 on indices used as benchmarks in financial instruments and financial contracts or to measure the performance of investment funds and amending Directives

text: and

text: and

text: Regulation (EU) No 596/2014

text: (OJ L 171, 29.6.2016, p. 1).

text: See paragraph 3.4 of Opinion

text: , and Board of the International Organization of Securities Commissions (OICU-IOSCO), Principles for Financial Benchmarks (July 2013), available at www.iosco.org. 38 See OICU-IOSCO Principles for Financial Benchmarks (July 2013), p. 27.

title: Opinion of the European Central Bank of 18 March 2020 on Hrvatska narodna banka (CON/2020/8)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 18 March 2020 on Hrvatska narodna banka (

text: ) Introduction and legal basis

text: On 29 January 2020 the European Central Bank (ECB) received from Hrvatska narodna banka (HNB) two requests for opinion on two draft laws, being (i) a draft Law amending the Law on HNB (hereinafter the ‘draft law on HNB’) and (ii) a draft law amending the Law on credit institutions (hereinafter the ‘draft law on credit institutions’) (together referred to hereinafter as the ‘draft laws’) . The ECB’s competence to deliver this opinion is based on Articles 127(4) and 282(5) of the Treaty on the Functioning of the European Union and the second, third and sixth indents of Article 2(1) of Council 2 3 Decision

text: , as the provisions of the draft laws addressed by this opinion relate to means of payment, to HNB 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 of the draft laws

text: 1.1 HNB’s institutional and personal independence and international cooperation The draft law on HNB clarifies that the institutions and bodies of the European Union (EU) and the governments, agencies, offices and other bodies of the EU Member States may not influence the members of HNB’s decision-making bodies. The draft law also specifies that the competence of the HNB Council to decide on HNB’s membership in international institutions and organisations shall be without prejudice to the powers of the ECB referred to in Article 6.1 of the Statute of the European System of Central Banks (ESCB) and of the ECB (the ‘Statute’) .

text: 1.2 Possibility for HNB to apply negative interest rates The draft law on HNB provides that the interest rate for the funds that HNB has received as deposits may be negative . 1.3 Foreign reserves of Republic of Croatia The draft law on HNB streamlines the existing provisions of the Law on HNB regarding the foreign reserves of the Republic of Croatia, providing that the foreign reserves comprise all types of foreign exchange assets and precious metals, including securities and all other assets in the convertible currency of a non-resident debtor or in units of account, in whatever form held, and that in order to manage the foreign reserves, HNB may buy and sell spot and forward or otherwise acquire these types of assets. Existing requirements relating to investment ratings by credit rating agencies are removed . 1.4 Preparation of HNB financial statements in accordance with ECB Guideline

text: (EU) 2016/2249

text: The draft law on HNB requires HNB to prepare financial statements in accordance with ECB Guideline

text: (EU) 2016/2249

text: (hereinafter the ‘ECB Accounting Guideline’). Provided there is no contrary decision of the HNB Council, HNB shall, when reporting on transactions that are not regulated by the ECB Accounting Guideline, apply valuation principles in accordance with International Financial Reporting Standards (IFRS) accepted by the EU, which are significant for the operations and reports of HNB. HNB’s financial statements are to be prepared according to these requirements for the financial year 2021 . 1.5 HNB’s general reserves, revaluation accounts and provisions for financial risks Under the existing provisions of the Law on HNB, HNB’s reserves comprise general reserves to cover general operational risks, the amount of which shall not be limited, and specific reserves to cover identified losses established pursuant to a decision of the HNB Council . The draft law on HNB instead provides that HNB shall establish general reserves to cover general business risks, where the lower bound of general reserves shall be determined by a decision of the HNB Council. HNB shall establish revaluation accounts for the purpose of revaluation of assets and liabilities in accordance with the ECB Accounting Guideline. HNB shall also establish revaluation accounts whose establishment is not regulated by the ECB Accounting Guideline, in accordance with applicable IFRS established by the European Commission. Revaluation accounts are to be established from the part of general reserves as at 1 January 2021 related to unrealised gains on the revaluation of assets and liabilities in the previous years, in the amount to be determined by the HNB Council . HNB may also establish provisions for financial risks in accordance with a decision

text: of the HNB Council. The provisions for risks are to be established from the part of general reserves as at 1 January 2021 in the amount to be determined by the HNB Council . 1.6 Profit and loss of HNB The draft law on HNB provides that the profit (or loss) of HNB shall be calculated for each financial year as the difference between HNB's total income and total expenditures . As noted in the explanatory memorandum accompanying the draft law on HNB, in accordance with the ECB Accounting Guideline, unrealised gains on exchange rate differences and changes in market prices are not recognised in the profit and loss account, i.e., they are not included in the calculation of the financial result. Therefore, the draft law shortens and simplifies the definition . HNB profit reported in the financial year shall be allocated to general reserves and to the State budget in accordance with a decision of the HNB Council. As a general rule, the profit of HNB shall be allocated so that 20% of the profit is allocated to general reserves and 80% constitutes revenue to the State budget. However, if the amount of general reserves on the last day of the financial year is lower than the lower bound of general reserves determined by the HNB Council, the HNB Council shall allocate the required amount of profit to general reserves until their lower bound is reached. As far as coverage of loss is concerned, the loss of HNB shall firstly be covered from general reserves. If HNB's loss is higher than the general reserves, the excess shall be covered from the profit of the following years . By contrast, under the existing Law on HNB, any shortfall between income and expenditures that cannot be covered from general reserves shall be covered from the State budget . 1.7 HNB’s planning for euro cash changeover The draft law on HNB provides that the location, structure and operations of HNB's treasury are of material importance for the financial, economic and security interests of the Republic of Croatia and its defence . As noted in the explanatory memorandum accompanying the draft law, HNB requires new larger capacities for cash storage at a new location due to the fact that the current capacities of HNB, because of their spatial and security conditions, fail to meet the requirements for the conversion of the kuna into euro. This provision therefore serves as a basis for the adoption of subordinate legislation by HNB in order to more precisely define security, defence and other measures aimed at preventing situations that could prove to be damaging to economic and financial national interests, especially where the supply of information in procurement procedures could damage security interests .

text: 1.8 HNB’s tasks concerning protection of kuna, euro and foreign banknotes and coins against

text: counterfeiting

text: The draft law on HNB provides that HNB shall have competence for the technical analysis of suspect samples of kuna and foreign banknotes and coins (including lipa coins) and combating the counterfeiting of these banknotes and coins . HNB shall also be the competent national authority for the protection of the euro against counterfeiting as provided for in

text: Council Regulation (EC) No 1338/2001

text: and

text: Council Regulation (EC) No 1339/2001

text: . While performing activities related to the protection of euro banknotes and coins against counterfeiting, the HNB shall act entirely in accordance with EU rules. HNB shall have competence for the technical analysis of suspect samples of euro and banknotes and coins and for combating the counterfeiting of these banknotes and coins. To this effect, HNB shall cooperate with the competent national authorities and institutions in Croatia and abroad and adopt implementing acts providing for the direct application of EU rules that are fully in line with EU regulations . 1.9 Security checks of specified HNB employees The draft law on HNB requires HNB to identify the employment positions with HNB that, due to their high degree of sensitivity, need to be subject to a basic security check of all applicants, with the basic security check to be carried out by the competent security and intelligence agency at HNB’s request . 1.10 HNB’s new task concerning calculation of national reference rate of average cost of financing the

text: Croatian banking sector

text: The draft law on credit institutions provides that the national reference rate of the average cost of financing the Croatian banking sector (NRR) shall be calculated by HNB and published on its website. HNB shall calculate the NRR based on data available to HNB, collected from credit institutions for regulatory purposes. HNB shall publicly disclose the methodology for the calculation of the NRR and the NRR release calendar on its website . As noted in the explanatory memorandum accompanying the draft law on credit institutions, the NRR is the only index calculated and published with the explicit aim of serving as an index to determine the variable portion of the variable interest rate on consumer loans. The NRRs (24 different indices) are currently not calculated by HNB as the holder of the aforementioned data, but are calculated and published as implicit weighted interest rates by the Croatian Banking Association based on the data on the cost of financing of credit institutions in Croatia published by HNB .

text: 2. Observations

text: 2.1 HNB’s institutional and personal independence 2.2 The ECB welcomes the clarification that the Croatian Government may not influence the members of the HNB’s decision-making bodies. This amendment of the Law on HNB makes this provision fully consistent with Article 130 of the Treaty, in line with suggestions previously made by the ECB . 2.3 Foreign reserves of Republic of Croatia The ECB notes that the new provisions regarding the Republic of Croatia’s foreign reserves closely correspond to the wording of the second indent of Article 23 of the Statute. 2.4 Preparation of HNB financial statements in accordance with ECB Guideline

text: (EU) 2016/2249

text: The ECB welcomes the amendment proposed by the draft law on HNB whereby HNB will prepare its financial statements in accordance with the ECB Accounting Guideline. Although the ECB Accounting Guideline does not lay down binding rules for the national reports and financial accounts of any national central bank (NCB), in order to achieve consistency and comparability between Eurosystem and national regimes, the ECB recommends that NCBs should, to the extent possible, follow the rules set out in this Guideline for their national reports and financial accounts . 2.5 HNB’s general reserves, revaluation accounts and provisions for financial risks Under the principle of financial independence provided for in Article 130 of the Treaty, an NCB, in the performance of its tasks, may independently assess financial risks involved in its operations, and has the power to take decisions on any necessary precautions. Consequently NCBs should be given the ability to safeguard the real value of their capital and assets by being free to independently create adequate financial buffers . The ECB therefore welcomes the provisions of the draft law on HNB concerning HNB’s general reserves, revaluation accounts and provisions for financial risks, which will contribute to the financial independence of HNB. 2.6 Profit and loss of HNB With regard to profit allocation, an NCB’s statute may prescribe how its profits are to be allocated , and the ECB welcomes the clarifications introduced in this respect. Furthermore, profits may be distributed to the State budget only after any accumulated losses from previous years have been covered . The ECB therefore welcomes the fact that the draft law on HNB provides for this contingency. However, the draft law on HNB eliminates the existing provision whereby any shortfall between income and expenditures that cannot be covered from general reserves shall be covered from the State budget. Notwithstanding HNB’s current financial position, the ECB cautions against any situation in which an NCB’s net equity is below the level of its statutory capital (or is even

text: negative) for a prolonged period of time, including where losses beyond the level of capital and the reserves are carried over. Any such situation may not only negatively impact the NCB’s ability to perform its ESCB-related tasks, but also its national tasks. Therefore, the event of an NCB’s net equity becoming less than its statutory capital (or even negative) would require the respective Member State to provide the NCB with an appropriate amount of capital at least up to the level of the statutory capital within a reasonable period of time so as to comply with the principle of financial independence . Against this backdrop, the ECB considers the existing mechanism whereby losses that cannot be covered from general reserves are automatically covered from the State budget to be a useful mechanism that serves to strengthen HNB’s financial independence. The ECB regrets the fact that this mechanism is not maintained in the current draft law on HNB. 2.7 HNB’s tasks concerning protection of kuna, euro and foreign banknotes and coins against

text: counterfeiting

text: Under the existing Croatian legal framework, HNB is responsible for the handling of suspect kuna and foreign banknotes and coins (including lipa coins), as well as protecting euro banknotes and coins against counterfeiting and distribution . Consequently, the draft law on HNB does not confer genuinely new tasks on HNB in this respect, and the issue of assessing whether the conferral of new tasks on an NCB complies with the prohibition of monetary financing does not arise in the case at hand. The ECB welcomes the fact that HNB will act entirely in accordance with EU rules while performing activities related to the protection of euro banknotes and coins against counterfeiting and distribution. 2.8 HNB’s new task concerning calculation of national reference rate of average cost of financing the

text: Croatian banking sector

text: The draft law on credit institutions confers on HNB the new task of calculating and publishing the NRR on its website. The ECB understands that the NRR is one of the most important reference interest rates in Croatia and has thus far been calculated and published by the Croatian Banking Association. The ECB understands that as at September 2019 a 29% share of loans with a variable interest rate referenced the NRR; this share amounted to HRK 46 billion of credit institutions’ loans . The ECB understands that due to the importance of the NRR for the domestic financial market, and in order to ensure the continuity and independence of the NRR’s calculation and publication, the NRR and related calculation methodology will be published by HNB on its website for the first time in May 2020, and will continue to be published on a quarterly basis. 2.8.1 Where a new task is conferred on an ESCB central bank, that task must be assessed against the prohibition on monetary financing under Article 123 of the Treaty. For the purposes of that prohibition,

text: Article 1(1)

text: (b)(ii) of

text: Council Regulation (EC) No 3603/93

text: defines ‘other type of credit facility’ as, inter alia, ‘any financing of the public sector’s obligations vis-à-vis third parties’.

text: 2.8.2 Ensuring that Member States implement a sound budgetary policy is one of the key objectives of the monetary financing prohibition, which may not be circumvented . In view of this, the task of financing measures, which are normally the responsibility of the Member States and funded from their budgetary sources rather than by the NCBs, must not be entrusted to NCBs. To decide what constitutes financing of the public sector’s obligations vis-à-vis third parties, which can be understood as providing central bank financing outside the scope of central bank tasks, it is necessary to carry out a case-by-case assessment of whether the task to be undertaken by an NCB is a central bank task or a government task, i.e. a task within the responsibility of the Member State. In other words, adequate safeguards must be in place to ensure strict compliance with the prohibition of monetary financing and the maintenance of sound budgetary policy by each Member State. 2.8.3 As part of its discretion in the exercise of its duty, on the basis of

text: Article 271

text: (d) of the Treaty and Article 35.6 of the Statute, and in order to ensure that NCBs honour the obligations laid down by the Treaty, the Governing Council has endorsed safeguards of that kind in the form of criteria for determining what may be seen as falling within the scope of a public sector’s obligation within the meaning of

text: Article 1(1)

text: (b)(ii) of

text: Regulation (EC) No 3603/93

text: or, in other words, what constitutes a government task as follows: First, central bank tasks are in particular those tasks that are related to the tasks that have been conferred upon the ECB and the NCBs by the Treaty and the Statute. These tasks are mainly defined in

text: Article 127(2)

text: , (5) and (6) and Article 128(1) of the Treaty, as well as

text: Article 22

text: and Article 25.1 of the Statute. Second, as Article 14.4 of the Statute allows NCBs to perform ‘other functions’, new tasks – i.e. tasks that are not related to tasks that have been conferred upon the ECB and the NCBs – are not precluded per se. However, new tasks that are undertaken by an NCB and that are atypical of NCB tasks or are clearly discharged on behalf of, and in the exclusive interest of the government or of other public sector entities, should be considered government tasks. Third, an important criterion for qualifying a new task as atypical of an NCB task or as being clearly on behalf of, and in the exclusive interest of the government or other public sector entities, is the impact of the task on the institutional, financial and personal independence of that NCB. In particular, the following aspects should be taken into account: (a) whether the performance of the new task creates conflicts of interest with existing central bank tasks that are not adequately addressed, and does not necessarily complement those existing central bank tasks. If a conflict of interest arises between existing and new tasks, sufficient safeguards to mitigate that conflict should be in place. The complementarity between a new task and the existing central bank tasks should not be interpreted broadly, so as to lead to the creation of an indefinite chain of ancillary tasks. Such complementarity should also be examined in relation to the financing of those tasks;

text: (b) whether without new financial resources the performance of the new task is disproportionate to the NCB’s financial or organisational capacity, and may have a negative impact on its capacity to perform properly existing central bank tasks; (c) whether the performance of the new task fits into the institutional set-up of the NCB in the light of central bank independence and accountability considerations; (d) whether the performance of the new task harbours substantial financial risks; (e) whether the performance of the new task exposes the members of the NCB decision-making bodies to political risks that are disproportionate and may also have an impact on their personal independence and, in particular, on the guarantee of term of office set out in Article 14.2 of the Statute. 2.8.4 On the basis of the criteria set out in paragraph 2.8.3, the following paragraphs assess whether HNB’s new task is in line with the monetary financing prohibition. New tasks related to the tasks conferred upon the ECB and the NCBs by the Treaty and the

text: Statute

text: Calculation and publication of interest rate benchmarks is not among the central banking tasks listed in

text: Article 127(2)

text: or (5) of the Treaty or otherwise conferred upon the NCBs by the Statute. However, interest rate benchmarks are important for the functioning of financial markets. Financial markets rely on such benchmarks as a reference in financial contracts, in this case in mortgage and consumer loans. The absence of robust and reliable benchmarks might therefore trigger financial market disruptions with a possible adverse impact on HNB’s ability to contribute to the stability of the financial system .

text: Tasks that are atypical of NCB tasks

text: Central banks have a particular interest in interest rate benchmarks, which are linked to financial stability. The ECB itself and the Eurosystem NCBs have tasks and responsibilities with respect to their contribution to the euro short-term rate determination process, albeit in the context of interbank rather than consumer lending . HNB’s new task of calculating and publishing the NRR on its website is not, therefore, atypical for an NCB of the ESCB.

text: Impact of the tasks on the independence of HNB

text: The ECB notes that the common framework to ensure the accuracy and integrity of indices used as benchmarks in financial instruments and financial contracts under

text: Regulation (EU) 2016/1011

text: of the European Parliament and of the Council does not apply to central banks, as central banks already meet principles, standards and procedures aimed at ensuring they exercise their activities with integrity and in an independent manner . Accordingly, HNB would have full discretion to develop the methodology for determining the NRR so as to ensure its accuracy, integrity and

text: reliability. When central banks provide benchmarks, it is their responsibility to establish appropriate internal procedures in order to ensure the accuracy, integrity, reliability and independence of those benchmarks, taking into account international best practice where relevant and appropriate . The degree to which internal procedures of a central bank should meet best practice standards will depend on its assessment of the risks to which the benchmark is exposed, e.g. from manipulation risk. Extent to which the performance of the new task creates conflicts of interest with existing central

text: bank tasks

text: The performance of HNB’s new task complements its existing tasks, as central banks have an interest in interest rate benchmarks for consumer loans due to their links to financial stability. HNB’s new task also complements its existing activities related to the provision of data collected from credit institutions for regulatory purposes for the calculation of the NRR. As regards conflicts of interest that may arise with respect to the involvement of HNB staff and members of HNB’s decision-making bodies in the production of the NRR, HNB might wish to consider publishing its arrangements for managing conflicts of interest on its website, in connection with the publication of the methodology for calculating the NRR. In the interests of accountability, HNB may also consider having the control procedures for the NRR audited for their compliance with relevant international best practices . Extent to which the performance of the new task places a disproportionate burden on HNB’s

text: financial or organisational capacity

text: The principle of financial independence requires that Member States may not put their NCBs in a position where they have insufficient resources to carry out both their ESCB-related tasks and their national tasks, from an operational and financial perspective. Furthermore, when allocating specific new tasks to NCBs, each NCB concerned should have sufficient financial and human resources at its disposal to ensure that the tasks can be carried out without impacting on the NCB’s financial or operational capacity to perform its ESCB tasks. In order to ensure that HNB’s capacity to perform its ESCB-related tasks is not impacted, HNB must, therefore, be in a position to avail itself of the necessary resources, including personnel, to carry out its new task of calculating and publishing the NRR on its website. Extent to which performance of the new task fits into HNB’s institutional set-up, in the light of the

text: principles of central bank independence and accountability

text: The performance of the new task fits smoothly into HNB’s institutional set-up, given the links with financial stability. The new task does not therefore raise accountability or personal and institutional independence concerns. Extent to which the performance of tasks harbours substantial financial risks The draft law on credit institutions does not directly address HNB’s potential liability in the event of any legal proceedings for damages in relation to the exercise of its powers under the draft law or

text: the failure to exercise these powers. In the absence of any provision in the draft law excluding HNB’s liability, HNB would ultimately be liable for damages in accordance with the general liability regime under Croatian law. Therefore, the new task conferred on HNB under the draft law would entail additional financial risks. Extent to which the performance of the new task exposes members of HNB’s decision-making bodies to disproportionate political risks and has an impact on their personal independence The performance of the new task does not appear to expose the members of HNB’s decisionmaking bodies to any disproportionate political risk or to have an impact on their personal independence. Conclusion regarding the compatibility of the draft law with the prohibition on monetary financing HNB’s new task of calculating and publishing the NRR on its website complements HNB’s financial stability role, as well as HNB’s existing provision of data for calculating the NRR. This task is not atypical for NCBs in the ESCB; the ECB itself and the Eurosystem NCBs have tasks and responsibilities in contributing to the euro short-term rate determination process, albeit in the context of inter-bank rather than consumer lending. When central banks calculate and publish interest rate benchmarks, it is their responsibility to establish appropriate internal procedures in order to ensure the accuracy, integrity, reliability and independence of those benchmarks, taking into account international best practice where relevant and appropriate. In addition, they should avail themselves of the necessary resources, including personnel, to carry out this new task.

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

text: Done at Frankfurt am Main, 18 March 2020.

text: [signed]

text: The President of the ECB

text: Christine LAGARDE


title: Opinion of the European Central Bank of 19 March 2020 on the oversight of payment systems and payment system operators (CON/2020/9)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 19 March 2020 on the oversight of payment systems and payment system operators (

text: ) Introduction and legal basis

text: On 10 January 2020, the European Central Bank (ECB) received a request from the Governor of the Central Bank of Cyprus (CBC) for an opinion on a draft directive of the CBC on the operation of payment systems under its oversight, on the role and governance of payment system operators and on the obligations of payment system participants (hereinafter the ‘draft directive’). The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the Functioning of the European Union and the third and fifth indents of

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

text: , as the draft directive contains provisions concerning the CBC and payment and settlement systems. 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 directive

text: 1.1 The main purpose of the draft directive is to enact a set of rules governing the functioning and operating methods of payment and clearing and settlement systems and of the operators of those systems that are subject to the provisions of the draft directive pursuant to a decision of the CBC . According to the explanatory note, the draft directive will set out details regarding the CBC’s existing role as overseer of retail payment systems. As stated in the explanatory note, in drafting the draft directive, the CBC had regard to the provisions of the Eurosystem’s revised oversight framework for payment systems . 1.2 The draft directive governs participation in, and suspension or exclusion from, a payment system. More specifically, the draft directive makes participation in a payment system conditional upon the satisfaction of eligibility and continuing participation criteria approved by the CBC for every payment system, and sets the procedure governing the admission of participants to a payment system, including the procedure to challenge the decision if the candidate participant is rejected .

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

text: 3 See Eurosystem oversight policy framework, Revised version (July 2016) available on the ECB’s website at https://www.ecb.europa.eu/paym/pol/html/index.en.html.

text: 4 See paragraphs 21 and 22 of the draft directive. 1.3 The draft directive governs the departure and discipline of payment system participants, including the conditions for voluntary departure, escalation and disciplinary procedures in case of infringement of the draft directive or system documents, the operator’s powers after force majeure events, the exclusion of a participant by the operator from the system in relation to exclusion events approved by the CBC or in case of infringement of the continuing participation criteria or if the participant has materially or repeatedly infringed any provision of the draft directive or the system documents . 1.4 The draft directive requires participants to deposit sums of money with a collateral administrator as trustee for the participants so that they can be used in the event that one or more participants are unable to honour their obligations within the payment system . 1.5 The draft directive also addresses settlement finality, providing that the system operator ensures that the system rules and other documents are in line with Directive 98/26/ΕC and the Settlement Finality in Payment and Securities Settlement Systems Laws 2003. The draft directive also requires the operator to ensure that the system rules define: (a) the time of entry of a transfer order in the payment system; and (b) the time after which a transfer order cannot be withdrawn . 1.6 The draft directive sets out the powers and role of the CBC over payment systems and their operators. According to the draft directive, the CBC may adopt a decision placing a payment system under its oversight and designating it as a payment system to which the provisions of the draft directive will apply. The CBC may permit gradual compliance with the draft directive based on a compliance plan to be implemented within a period of no more than two years . 1.7 The CBC may adopt decisions to recognise operators of payment systems meeting specified requirements, and may also impose further terms and conditions for the purpose of recognising an operator. The CBC may appoint one executive and one non-executive member of the operator’s board of directors and may object to the appointment or request the removal of any board member who does not meet the requirements set out in the draft directive. The CBC approves the operator’s memorandum and articles of association. The CBC may appoint one person to each of the operator’s technical, business, legal, risk management, internal audit, disciplinary, objections, business continuity and dispute resolution committees. The operator’s risk management committee is required to submit annual reports to the CBC, and the internal audit committee is required to submit quarterly reports to the CBC regarding compliance with the provisions of the draft directive. The CBC may make recommendations, provide guidance and require the operator to take any action to safeguard the attainment of the operator’s governance objectives. The operator’s organisational structure and reporting lines must be approved by the CBC. The CBC also approves the operator’s transparency, conflict of interest, internal audit and compliance monitoring, redaction, risk management, physical security, data security, business continuity and recovery and

text: 5 See paragraph 23 to 28 of the draft directive.

text: 6 See paragraph 34 of the draft directive.

text: 7 Directive

text: of the European Parliament and of the Council of 19 May 1998 on settlement finality in payment and securities settlement systems (OJ L 166 of 11.06.1998, p. 45).

text: 8 See paragraph 35 of the draft directive.

text: 9 See paragraph 4 of the draft directive. incident management policies . 1.8 Under the draft directive the CBC has a prominent role in relation to the operator’s delegation of functions to third parties. The third party service provider must cooperate with the CBC in connection with the services provided by it. The operator is obliged to make available to the CBC, upon the CBC’s request, all relevant data that may be required so as to enable the CBC to verify whether the service operator performs its functions in accordance with the draft directive. The CBC must be notified in advance of any delegation of function. The CBC’s prior consent is required for the delegation of critical or important functions to a third party . 1.9 Under the draft directive the operator must cooperate closely with the CBC in performing its duties and notify the CBC of any information pertaining to a participant of which it has reason to believe might adversely affect the operation of the payment system. The CBC must develop and apply an audit programme to monitor the operation of the payment system, the performance of the operator’s duties and system participant’s compliance with their obligations. The CBC has the power to replace the operator unilaterally in the event of serious or repeated inability or failure; imminent serious inability on the part of the operator to perform its functions or comply with the draft directive; if necessary to safeguard the stability of the payment system or the wider financial system; or to ensure the continuity and proper operation of the payment system . 1.10 The draft directive provides that the method of calculation of operator fees is specified in procedural rules adopted by the operator and approved by the CBC. Each participant must also pay the CBC an annual regulatory fee set by the CBC on a cost basis. The CBC may also set additional fees for specific payment systems. All fees are required to be published on the websites of the operator and the CBC . 1.11 The draft directive provides that, as a participant in a payment itself, the CBC must ensure that it complies with all of a participant’s obligations, and must pay fees and extraordinary charges on the same terms as other participants . 1.12 Finally, the draft directive provides that the CBC may require a payment system’s rules to be amended for the purpose of ensuring the stability, security and reliability of the system .

text: 2. General observations

text: 2.1 The ECB welcomes the draft directive, which will provide a more robust legal basis for the CBC’s existing tasks relating to the oversight of payment systems. The draft directive should thereby help to promote the sound governance, security and stability of retail payment systems and their operators. 2.2 Pursuant to the fourth indent of Article 127(2) of the Treaty, as mirrored in the fourth indent of

text: 10 See paragraphs 5 to 12 of the draft directive.

text: 11 See paragraph 14 of the draft directive.

text: 12 See paragraphs 15, 16 and 20 of the draft directive.

text: 13 See paragraphs 37 and 39 to 41 of the draft directive.

text: 14 See paragraph 42 of the draft directive.

text: 15 See paragraph 43 of the draft directive. Article 3.1 of the Statute of the European System of Central Banks and of the European Central Bank (hereinafter the ‘Statute of the ESCB’), the Eurosystem has the task of promoting the smooth operation of payment systems. Article 22 of the Statute of the ESCB furthers the performance of this task. Based on the foregoing the ECB and the national central banks should use the powers available to them to promote the smooth operation of clearing and payment systems. Oversight responsibilities are inter alia key to this general task . 2.3 The Eurosystem oversight policy framework states that for the purpose of overseeing individual financial market infrastructures, the Eurosystem assigns primary oversight responsibility to the central bank that is best placed to fulfil this function, either by virtue of its proximity to the overseen entity (e.g. where the system is legally incorporated in its jurisdiction) or by virtue of national laws that attribute specific oversight responsibilities to the central bank concerned, subject to any Treaty-based requirements. This is typically the case for systems with a clear national anchor, i.e. being legally incorporated in a jurisdiction or serving that particular national market , such as the retail payment systems intended to be covered by the draft directive. 2.4 The explanatory note accompanying the draft directive does not make reference to the Eurosystem revised oversight framework for retail payment systems, which establishes variable oversight requirements depending on whether a retail system is classified as a ‘prominently important retail payment system’ (PIRPS) or an ‘other retail payment system’ (ORPS) . In this respect, the ECB understands that the scope of the draft directive is to cover solely PIRPS and ORPS within the meaning of the Eurosystem Revised Oversight Framework for Retail Payment Systems (paragraph 3.1 below). 2.5 The oversight of payment systems has been recognised as one of the CBCs’ main tasks under existing provisions of Cypriot law . The draft directive does not confer new tasks on the CBC, but rather specifies the CBC’s existing tasks by establishing a set of detailed rules governing the CBC’s oversight of payment systems and payment system operators. Therefore, the issue of assessing whether the conferral of new tasks on a national central bank complies with the prohibition of monetary financing does not arise in the case at hand.

text: 3. Specific observations

text: 3.1 The ECB suggests amending the definition of ‘payment system’ in paragraph 2(1) of the draft directive, so as to clarify that the scope of application of the draft directive, as set out in paragraph 4 thereof, only covers PIRPS and ORPS within the meaning of the Eurosystem revised oversight framework for retail payment systems. This clarification would remove any residual uncertainty regarding the scope of application of the draft directive, and its interplay with Regulation (EU)

text: 16 See Section 3.1 of the Eurosystem oversight policy framework, Revised version (July 2016), available on the ECB’s website at www.ecb.europa.eu.

text: 17 See Section 5.2 of the Eurosystem oversight policy framework, Revised version (July 2016).

text: 18 See the revised oversight framework for retail payment systems, available on the ECB’s website at www.ecb.europa.eu. No 795/2014 of the European Central Bank (ECB/2014/28) , which applies to payment systems defined as ‘systemically important payment systems’ (SIPS) on the basis of certain quantitative and qualitative criteria .

text: Regulation (EU) No 795/2014

text: covers all SIPS, be they large-value or retail payment systems. Accordingly, such clarification would ensure that the draft directive is not in conflict with the Regulation. Furthermore, such clarification would be more in line with the CBC’s intention as set out in the explanatory note which states that the draft directive will only apply with regard to retail payment systems. 3.2 Under the Eurosystem revised oversight framework for retail payment systems, the participation requirements of PIRPS and the relevant rules and key procedures of both PIRPS and ORPS should be publicly disclosed. PIRPS and ORPS should disclose clear descriptions of the system’s design and operations, as well as the system’s and participants’ rights and obligations, so that participants can assess the risks they would incur by participating in the system . The consulting authority may wish to consider whether these elements should be reflected in the draft directive. 3.3 The Central Bank of Cyprus Law of 2002 is silent on the issue of the CBC’s liability with regard to the oversight of payment systems. The Central Bank of Cyprus Law of 2002 does not contain any provision excluding or limiting the liability of the CBC as the authority responsible for the oversight of payment systems. In line with previous ECB opinions, the Cypriot authorities should consider aligning the CBC’s liability in relation to its oversight of payment systems with its liability concerning its supervision of credit institutions, given that potential liability issues could represent substantial financial risks for the CBC . 3.4 For the sake of legal certainty, the ECB suggests that the scope of the operator’s legal responsibility under paragraph 5(2) of the draft directive could be further clarified. As currently phrased, it is unclear whether this provision creates a new statutory duty for the operator, or whether liability arises only if the operator is in breach of the provisions of the arrangement establishing the payment system. This opinion will be published on the ECB’s website. Done at Frankfurt am Main, 19 March 2020. [signed] The President of the ECB Christine LAGARDE

text: Regulation (EU) No 795/2014

text: of the European Central Bank of 3 July 2014 on oversight requirements for systemically important payment systems (ECB/2014/28) (OJ L 217, 23.7.2014, p. 16).

text: 23 See, for example, paragraph 3.1 of Opinion

text: , paragraphs 2.3.6 and 2.3.8 of Opinion

text: , paragraph 3.1.7 of Opinion

text: and paragraph 3.1.7 of Opinion