text: Decree-Law No 87 of 26 June 2012, Gazzetta Ufficiale della Repubblica Italiana No 148, 27.6.2012, p. 3. 2 OJ L 189, 3.7.1998, p. 42. 3 See ECB Opinions

text: and

text: . All ECB Opinions and documents are available on the ECB’s website at www.ecb.europa.eu. 4 The total amount of New Financial Instruments issued by MPS would be up to EUR 3.9 billion.

text: See Title IV, Section I of the Guide to consultation of the European Central Bank by national authorities regarding draft legislative provisions. See also paragraphs 2.2 and 2.3 of ECB Opinion

text: Any involvement of an NCB in the application of measures to strengthen financial stability must be compatible with the Treaty, i.e. NCBs’ functions must be performed in a manner that is fully compatible with their functional, institutional and financial independence so as to safeguard the proper performance of their tasks under the Treaty and the Statute. To the extent that national legislation provides for a role of an NCB that goes beyond advisory functions and requires it to assume additional tasks, it must be ensured that these tasks will not affect the NCB’s ability to carry out its ESCB-related tasks from an operational and financial point of view. See the ECB Convergence Report 2012, p. 23.

title: Opinion of the European Central Bank of 3 August 2012 on recapitalisation of the Banca Monte dei Paschi di Siena (CON/2012/64)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 3 August 2012 on recapitalisation of the Banca Monte dei Paschi di Siena (

text: ) Introduction and legal basis

text: On 26 June 2012, the Italian Government adopted Decree-Law No 87 (hereinafter the ‘Decree-Law’), which entered into force on 27 June 2012. On 27 July 2012 the European Central Bank (ECB) received a request from the Ministry of Economic Affairs and Finance for an opinion on the Decree-Law. Articles 5 to 12 of the Decree-Law regard recapitalisation of the Banca Monte dei Paschi di Siena (MPS). 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 sixth indents of

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

text: on the consultation of the European Central Bank by national authorities regarding draft legislative provisions , as the Decree-Law relates to the Banca d’Italia and the 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 Decree-Law

text: 1.1 To achieve the recapitalisation objectives in line with the European Banking Authority Recommendation of 8 December 2011 (hereinafter the ‘EBA Recommendation’), the Ministry is empowered to recapitalise MPS, at the latter’s request subject to certain conditions. On request, the Ministry will subscribe to up to EUR 2 billion in new financial instruments issued by MPS, qualifying as regulatory capital (Core Tier 1) under the EBA Recommendation (hereinafter the ‘New Financial Instruments’). This operation will be conditional on a swap, consisting in the redemption of the outstanding bonds issued by MPS and subscribed by the Ministry under Decree- Law No 185 of 29 November 2008 , for the nominal amount of EUR 1.9 billion, while the Ministry will subscribe to an equal amount of further New Financial Instruments issued by MPS . Another condition for the activation of the scheme, which will be in place until December 2012, will be the

text: adoption by the European Commission of a decision confirming that the Decree-Law is compatible with the Union framework for State aid measures. 1.2 Under the scheme, MPS will send a request with a restructuring plan, to the Ministry and the Banca d’Italia at least 30 days prior to the planned date for the subscription. If Banca d’Italia gives a positive assessment within 15 days from receipt of the request, the Government will carry out the recapitalisation on the basis of an ad hoc decree. 1.3 The New Financial Instruments issued by MPS will not carry voting rights and may be converted into ordinary shares at its request. MPS will have the right to repayment or redemption, subject to authorisation by the Banca d’Italia, having regard to the financial position and solvency of the issuer and banking group. Payment of interest on the New Financial Instruments will depend on the availability of distributable profits: if interest is not paid, due to the absence or inadequacy of distributable profits, the issuer will allocate newly issued ordinary shares to the Ministry for a share of net equity corresponding to the amount of the unpaid coupon. 1.4 The Decree-Law also envisages the following as possible resources to fund the recapitalisation: (a) linear reduction in the budget allocations; (b) reduction of individual legislative expenditure authorisations; (c) temporary use of cash in special accounts with a corresponding reduction in the respective expenditure authorisations; (d) issuance of Government bonds. 1.5 The Ministry, after consulting the Banca d’Italia, will issue a decree implementing the Decree-Law and adopting a prospectus for the New Financial Instruments. The prospectus will govern interest payments, redemption, repayment and conversion, as well as any other element needed to manage the phases following subscription to the New Financial Instruments.

text: 2. The appropriate time to consult the ECB

text: In the Italian legal system, the adoption of a decree-law is part of a two-phase urgent legislative procedure. In the first phase, the Government adopts the decree-law which immediately enters into force and takes effect, for a limited period of 60 days, on publication in the Gazzetta Ufficiale. In the second phase, the Government submits the Decree-Law to the Parliament, on the same day of its adoption, for conversion into a law within the 60-day period. Paragraph 2 of Opinion

text: already noted that decree-laws enter into force on adoption by the Government, and that therefore consultation should take place before adoption. Consulting the ECB after the submission of a decree-law to Parliament is not sufficient to comply with the consultation obligation and the ECB draws the Ministry’s attention to the proper procedure for consultation .

text: 3. Recapitalisation of MPS

text: The recapitalisation needs of MPS, the third-largest Italian banking group, are primarily triggered by the higher capital threshold required by the European Banking Authority (EBA), which was to be implemented by the end of June 2012. The size of the Government’s new capital injection of up to EUR 2 billion is sufficient to comply retroactively with EBA’s capital threshold, including a certain safety margin for potential future losses. The New Financial Instruments used for the recapitalisation are an appropriate instrument as they are classified as Core Tier 1 capital by the EBA. Thus, from a financial stability perspective the planned recapitalisation of MPS is welcome as it increases the stability of this systemically relevant bank and contributes to maintaining investors’ confidence in the Italian banking sector.

text: 4. Use of government bonds to recapitalise MPS

text: The Italian Government may issue government bonds to fund MPS’ recapitalisation. The ECB understands that these bonds would be sold on the market, and the proceeds would be used to subscribe to the New Financial Instruments issued by MPS. This would not give rise to any concern from a monetary financing perspective. The ECB however notes that, where a State recapitalisation of a credit institution to restore its solvency takes place by way of direct placement of the government-issued debt instruments, the subsequent use of such debt instruments as collateral in central bank liquidity operations would raise monetary financing concerns in the absence of any alternative market-based funding sources.

text: 5. Involvement of the Banca d’Italia

text: The ECB considers that the wording of the Decree-Law complies with the principle of central bank independence. The implementing Regulation, to be adopted by the Ministry after consulting the Banca d’Italia under Article 11 of the Decree-Law, will also need to comply with the principle of central bank independence .

text: Done at Frankfurt am Main, 3 August 2012. [signed]

text: The Vice-President of the ECB

text: Vítor CONSTÂNCIO


text: BGBl 309/1971. 3 The most recent opinions are

text: and CON 2012/45. All ECB Opinions are available on the ECB’s website at www.ecb.europa.eu. 5 Similarly, see

text: and

publisher: Europeiska centralbanken

sprak: en

title: Opinion of the European Central Bank of 13 August 2012 on the increase of Austria’s quota with the International Monetary Fund (CON/2012/65)

serie: con

text: OPINION OF THE EUROPEAN CENTRAL BANK of 13 August 2012 on the increase of Austria’s quota with the International Monetary Fund (

text: ) Introduction and legal basis

type: rubrik

text: On 18 July 2012, the European Central Bank (ECB) received a request from the Austrian Ministry of Finance for an opinion on a draft law on the increase of Austria’s quota with the International Monetary Fund (IMF) (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: on the consultation of the European Central Bank by national authorities regarding draft legislative provisions , as the draft law relates to the Oesterreichische Nationalbank (OeNB). 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.

type: stycke

text: 1. Purpose of the draft law

text: 1.1 On 15 December 2010, the IMF Board of Governors adopted Resolution No 66-2 on the ‘Fourteenth General Review of Quotas and Reform of the Executive Board’. This Resolution covers, inter alia, increases in the quotas of members. IMF member countries have committed in the same Resolution to use their best efforts to complete the necessary implementation steps no later than the Annual Meetings 2012. 1.2 The draft law incorporates the IMF quota increase into Austrian law. Austria’s quota will increase from 2 113.9 million Special Drawing Rights (SDR) to SDR 3 932 million. The draft law entitles and obliges the OeNB to pay for the proposed increase. As noted in the explanatory memorandum to the draft law, the OeNB assumed the entire Austrian quota in 1971 and has paid all subsequent quota increases, meaning that it should also pay the latest proposed increase in the quota. The payment will result in an exchange of assets and liabilities on the OeNB’s balance sheet, which would acquire the IMF quota in return for SDR 1 818.1 million. 1.3 The explanatory memorandum also notes that the OeNB exercises the rights arising from the quota increase in accordance with the Law of 23 June 1971 on the increase of Austria’s IMF quota and

text: the transfer of the entire quota by the OeNB . According to Article 2(1) of this Law, the OeNB is authorised to fulfil all financial commitments resulting from the Austria’s membership with the IMF.

text: 2. Monetary financing prohibition

text: Several ECB opinions have noted that the tasks performed by a national central bank must comply with the monetary financing prohibition under Article 123 of the Treaty and

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

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

text: and

text: b(1) of the Treaty . Pursuant to

text: Article 7 of Regulation (EC) No 3603/93

text: , the financing by national central banks of obligations falling upon the public sector vis-à-vis the IMF is not regarded as a credit facility within the meaning of Article 123 of the Treaty. The fourteenth recital of Regulation 3603/93 sets out the rationale of the exemption and confirms that it is appropriate to authorise the financing by the national central banks of obligations falling upon the public sector vis-à-vis the IMF, as this financing results in claims which have all the characteristics of reserve assets. Therefore, the ECB finds that payment by the OeNB of the proposed increase in Austria’s IMF quota complies with

text: Article 7 of Regulation (EC) No 3603/93

text: and does not infringe the monetary financing prohibition.

text: 3. Central bank independence

text: The OeNB is responsible for paying any increases in Austria’s IMF quota, exercises all rights connected with the IMF system of SDRs and is in charge of fulfilling all Austrian financial obligations vis-à-vis the IMF. The ECB understands that in this context and in line with the principle of central bank independence enshrined in Article 130 of the Treaty and Article 7 of the Statute of the European Central Bank and of the European System of Central Banks, the OeNB takes decisions regarding the management of the SDRs in a fully independent manner .

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

text: Done at Frankfurt am Main, 13 August 2012.

text: [signed]

text: The President of the ECB

text: Mario DRAGHI

type: vagledning

utgivare: ecb


text: Regulation on foreign trade, Bundesgesetzblatt I, 22.11.1993, p. 1934, 2493. 2 OJ L 189, 3.7.1998, p. 42. 3 See IMF Committee on Balance of Payments Statistics, ‘IMF’s Balance of Payments and International Investment Position Manual, sixth Edition’, August 2011, available on the IMF’s website at www.imf.org. 4 OJ L 166, 27.6.2012, p. 22. 5 OJ L 65, 3.3.2012, p. 1.

text: All publications are available on the ECB’s website at www.ecb.europa.eu. 7 The three types of direct investment relationships are: (a) direct investors’ investment in direct investment enterprises, (b) investments from the direct investment enterprises to the direct investor (reverse investment), and (c) investments between fellow enterprises. 8 See paragraph 3 of Opinion

text: which refers to Guideline ECB/2004/15 which was subsequently replaced by Guideline ECB/2011/23.

title: Opinion of the European Central Bank of 16 August 2012 on foreign trade reporting requirements (CON/2012/66)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 16 August 2012 on foreign trade reporting requirements (

text: ) Introduction and legal basis

text: On 28 June 2012, the European Central Bank (ECB) received a request from the Federal Ministry of Economics and Technology for an opinion on the draft regulation (hereinafter the ‘draft regulation’) amending the Regulation on foreign trade (hereinafter the ‘RFT’). The ECB’s competence to deliver an opinion is based on Article 127(4) and Article 282(5) of the Treaty on the Functioning of the European Union and the third and fourth indents of

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

text: on the consultation of the European Central Bank by national authorities regarding draft legislative provisions , as the draft regulation relates to the Deutsche Bundesbank and the collection and distribution of balance of payments statistics. In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.

text: 1. Purpose of the draft regulation

text: 1.1 The draft regulation will adapt the reporting requirements under the RFT to international standards developed by the Committee on Balance of Payments Statistics of the International Monetary Fund (IMF) and transposed into Union law under: (a)

text: Commission Regulation (EU) No 555/2012 of 22 June 2012

text: amending

text: Regulation (EC) No 184/2005

text: of the European Parliament and of the Council on Community statistics concerning balance of payments, international trade in services and foreign direct investment, as regards the update of data requirements and definitions , and (b) Guideline ECB/2011/23 of 9 December 2011 on the statistical reporting requirements of the European Central Bank in the field of external statistics , both of which will apply from 1 June 2014. 1.2 Section 63 of the draft regulation also streamlines the RFT and inserts limited amendments related to the functioning of the Single Euro Payments Area.

text: 2. General observations

text: In accordance with Article 5.1 of the Statute of the European System of Central Banks and the European Central Bank, the ECB, assisted by the national central banks, collects the necessary statistical information in order to undertake the tasks of the ESCB. As stated in the ‘Public commitment on European Statistics by the ESCB’ , the ECB attaches great importance to the quality of its statistics. This concerns, inter alia, the euro area balance of payments and international investment position statistics whose aim is to support the ECB’s monetary policy and other Eurosystem tasks. Hence, the ECB broadly welcomes this draft regulation which will ensure consistency with the reporting requirements under Guideline ECB/2011/23 and facilitate adherence to the principles of the ECB Statistics Quality Framework.

text: 3. Specific observations

text: The ECB particularly welcomes the following amendments introduced by the draft regulation: (a) Amendments to the template in Annex Z 4 of the RFT, whereby additional information is to be provided on the International Securities Identification Number (ISIN) code and on the nominal value/ number of shares, with respect to payments for direct investments denominated in shares. These amendments enable transactions to be more clearly distinguished between those that belong to ‘direct investment’ and ‘portfolio investment’, as required in Table 2 (Financial Account) of Annex II to Guideline ECB/2011/23; (b) Amendments to Article 62(3) of the RFT and new templates introduced in Annex Z 5A regarding claims and liabilities arising from financial relationships with related foreign non-banks. These templates enable the three types of direct investment relationships required under section 6.1 of Annex III to Guideline ECB/2011/23 to be distinguished. Furthermore, the new currency breakdown enables a more accurate compilation of derived transactions and revaluations due to exchange rate changes as required in Table 2 (Financial Account) and Table 4 of Annex II to Guideline ECB/2011/23; (c) Amendment to the template in Annex Z 5B, which replaces annual reporting with quarterly reporting of cross-border positions on financial derivatives of resident non-banks, as required in Table 4 of Annex II to Guideline ECB/2011/23. Consistent with its previous opinion , the ECB welcomes the early introduction of the quarterly reporting obligations by the draft regulation.

text: This opinion will be published on the ECB’s website. Done at Frankfurt am Main, 16 August 2012. [signed]

text: The President of the ECB

text: Mario DRAGHI


text: OJ L 189, 3.7.1998, p. 42. 2 Amtsblatt zur Wiener Zeitung No 242, 10.12.2008, p. 32. 3 OJ L 166, 27.6.2012, p. 22.

text: OJ l 65, 3.3.2012, p. 1. 5 Available on the ECB’s website at www.ecb.europa.eu. 6 Available on the ECB’s website at www.ecb.europa.eu. 7 Thresholds were formerly differentiated by type of sector and whether they pertained to imports or exports. 8 See paragraph 7(i) of Opinion

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

text: See paragraph 7(ii) of Opinion

text: on a previous version of the draft regulation on the reporting of crossborder services (ZABIL 1/2005). Opinion

text: refers to Guideline ECB/2004/15, which has subsequently been replaced by Guideline ECB/2011/23. 10 The four sub-headings are: 7.1: Fees for securities lending and gold lending; 7.2: Gross transaction volume from securities sales to non-resident counterparties; 7.3: Gross transaction volume from securities purchases from non-resident counterparties; and 7.4: Other financial services.

title: Opinion of the European Central Bank of 24 August 2012 on reporting requirements for cross-border service transactions (CON/2012/67)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 24 August 2012 on reporting requirements for cross-border service transactions (

text: ) Introduction and legal basis

text: On 1 August 2012, the European Central Bank (ECB) received a request from the Oesterreichische Nationalbank (OeNB) for an opinion on a balance of payments reporting regulation of the OeNB which governs the reporting of cross-border service transactions (hereinafter the ‘draft regulation’). The ECB’s competence to deliver an opinion is based on Article 127(4) and Article 282 (5) of the Treaty on the Functioning of the European Union as well as the third and fourth indent of

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

text: 1. Purpose of the draft regulation

text: 1.1 The draft regulation will replace the current balance of payments regulation (ZABIL 1/2009 ) of the OeNB which governs the reporting of cross-border service transactions. The draft regulation also implements Article 6 of the Law on exchange controls 2004, under which the OeNB is responsible for compiling the Austrian balance of payments, the international investment position statistics, the direct investment statistics and all statistics regarding cross-border transactions and positions in the context of the abovementioned statistics based on EU regulations. The draft regulation is necessary owing to amendments under

text: Regulation (EU) No 555/2012

text: amending

text: Regulation (EC) No 184/2005

text: of the European Parliament and of the Council on Community statistics concerning balance of payments, international trade in services and foreign direct investments, as regards the update of data requirements and definitions . Although not explicitly mentioned in the OeNB request accompanying the draft regulation, the ECB understands that amendments are also required on the basis of standards set out in Guideline ECB/2011/23 of 9

text: December 2011 on the statistical reporting requirements of the European Central Bank in the field of external statistics . 1.2 Due to enhanced OeNB access to the VAT Information Exchange System, the draft regulation will also raise the thresholds for the reporting of transactions on all types of cross-border business activity pertaining to services, by reporting agents in the non-financial corporate sector to a uniform level of EUR 500 000. 1.3 Additionally, some minor technical amendments are made in the draft regulation. References and quotes shall reflect changes in the legal framework, reporting channels shall be adapted to reflect widespread IT use, reporting obligations shall be redefined, the conceptual reporting framework shall be harmonized and the reporting requirements applying to credit institutions and insurance companies shall be specified. The draft regulation shall enter into force on 1 January 2013.

text: 2. General observation

text: In accordance with Article 14.3 of the Statute of the European System of Central Banks and the European Central Bank (hereinafter the ‘Statute of the ESCB’), national central banks must act in accordance with the guidelines of the ECB. The ECB generally welcomes the draft regulation, which will ensure consistency with the reporting requirements under Guideline ECB/2011/23 following the basic principles of the ECB Statistics Quality Framework . The main purpose of euro area balance of payments and international investment position statistics is to support the ECB’s monetary policy and other Eurosystem tasks. Moreover, as stated in the Eurosystem’s mission statement , accountability, transparency and good governance are important values supporting the integrity of the statistical functions defined by Article 5 of the Statute of the ESCB.

text: 3. Specific observations

text: 3.1 The ECB welcomes the OeNB’s enhanced access to existing administrative information which has made necessary the removal of specific thresholds on cross-border service transactions in the draft regulation. The ECB notes that while these changes imply a more streamlined collection procedure, simplified guidelines and a reduced response burden for data compilers, it should be ensured that sufficiently precise data for the production of euro area cross-border statistics is maintained . 3.2 The ECB suggests the inclusion of the term ‘Activities of Holding Companies’ as sub-division 64.2 in the table providing the list of relevant ‘Economic Activities’ in Section 1.6, as this type of activity is referred to in Sections 2 and 3 of the draft regulation.

text: 3.3 As data on cross-border services will continue to be collected on a quarterly and/or annual basis, the following ECB stance still applies: the OeNB remains responsible for providing the ECB with aggregated data for the euro area monthly balance of payments statistics. This data must meet the quality standards set out in Guideline ECB/2011/23 . 3.4 In the Appendix to the draft regulation, the ECB suggests that the four sub-items listed under the heading ‘7. Financial Services’ are clarified further, so that a direct connection can be made with the definitions for ‘Financial Services’ in Section 2.7 of Annex II to

text: Regulation (EU) No 555/2012

text: and with the relevant statistical indicators on ‘Financial Services’, as required in Table 2 of Annex II to Guideline ECB/2011/23.

text: Done at Frankfurt am Main, 24 August 2012.

text: [signed]

text: The President of the ECB

text: Mario DRAGHI


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

text: See 2012 Convergence Report p. 26. All ECB reports and opinions are available on the ECB’s website at www.ecb.europa.eu. 3 4

text: Opinion

text: . 6 See also paragraph 2.1 of Opinion

text: . 7 See the ECB’s Convergence Report, May 2010, p. 21, paragraph 3.1.5 of Opinion

text: , paragraph 3.2.1 of Opinion

text: and paragraph 3 of Opinion

text: . 8 See, for example, paragraph 3 of Opinion

text: and paragraph 3.3 of Opinion

text: . 9 The monetary financing prohibition in Article 123 of the Treaty is further clarified in

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

text: specifying definitions for the application of prohibitions in Article

text: and

text: b(1) of the Treaty (OJ L 332, 31.12.1993, p. 1) according to which overdraft facilities or any other type of credit facility with the ECB or the NCBs of Member States in favour of Union institutions or bodies, central governments, regional, local or other public authorities, other bodies governed by public law, or public undertakings of Member States are prohibited, as is any purchase directly from these public sector entities by the ECB or NCBs of debt instruments.

title: Opinion of the European Central Bank of 4 September 2012 on credit unions (CON/2012/68)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 4 September 2012 on credit unions (

text: ) Introduction and legal basis

text: On 18 July 2012, the European Central Bank (ECB) received a request from the Irish Minister for Finance for an opinion on the General Scheme of the Credit Union Bill 2012 (hereinafter the ‘General Scheme’). 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 sixth indents of

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

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

text: 1. Purpose of the General Scheme

text: 1.1 The General Scheme proposes wide-ranging measures to strengthen the regulatory framework for credit unions, including more effective governance and regulatory requirements. 1.2 The publication of the General Scheme was a structural benchmark of the EU-IMF Financial Support Programme for Ireland. 1.3 The General Scheme’s regulatory requirements framework for credit unions includes requirements in respect of reserves, liquidity, borrowing, lending, savings, investments, operations, risk management, records management, information systems and outsourcing. Credit unions will also be required to prepare a strategic plan. The CBI is given the power to make regulations relating to the above matters after consulting with the Minister and other bodies. 1.4 The General Scheme sets out a statutory governance code with minimum governance standards for credit unions. Credit unions will be required to submit an annual compliance statement to the CBI certifying compliance with these governance standards. The General Scheme sets out the roles and

text: responsibilities of the chair, board and management of credit unions. It also deals with fitness and probity, skills, conflicts of interest and the need for robust systems, processes and controls. 1.5 The General Scheme establishes a statutory stabilisation regime for credit unions. It sets out the conditions under which stabilisation support will be available to viable but undercapitalised credit unions. In particular, the CBI may, subject to the consent of the Minister, provide stabilisation support to a credit union. The General Scheme provides that credit unions contribute to a stabilisation fund that will meet all costs of stabilisation support. The implementation by the CBI of the stabilisation regime will be examined by a Stabilisation Committee, whose members will be appointed by the Minister. 1.6 The General Scheme establishes a process for the restructuring of credit unions. It sets out the process under which funding will be available to facilitate the restructuring of credit unions and establishes a restructuring fund. The Minister may provide financial support from the Restructuring Fund to a credit union. Credit unions will contribute to the Restructuring Fund to meet the cost of restructuring. The Minister will be reimbursed for any funds advanced to the Restructuring Fund. The restructuring process will be facilitated and overseen by a Credit Union Restructuring Board (the ‘Rebo’), whose members will be appointed by the Minister. Any restructuring plan approved by the Rebo must be submitted to the CBI for approval.

text: 2. General observations

text: 2.1 The EU-IMF Financial Support Programme requires reform of Irish credit union law and strengthening of the regulatory framework applying to credit unions, including effective governance and stabilisation requirements. The ECB notes that the General Scheme is in line with the requirements of the EU-IMF Financial Support Programme for Ireland. 2.2 As specified in the ECB’s Convergence Reports and opinions, any involvement of a national central bank (NCB) in the application of measures to strengthen financial stability must be compatible with the Treaty, i.e. NCBs’ functions must be performed in a manner that is fully compatible with their functional, institutional, and financial independence so as to safeguard the proper performance of their tasks under the Treaty and the Statute . To the extent that national legislation provides for a role of an NCB that goes beyond advisory functions and requires it to assume additional tasks, it must be ensured that these tasks will not affect the NCB’s ability to carry out its ESCB-related tasks from an operational and financial point of view . Additionally, the inclusion of NCB representatives in collegiate decision-making supervisory bodies or other

text: authorities would need to give due consideration to safeguards for the personal independence of the members of the NCB’s decision-making bodies . 2.3 The ECB notes the robust nature of the new measures and welcomes their substantial enhancement of the regulatory tools available to the CBI to improve protection for credit union members and stability in the credit union sector. 2.4 As regards the financing of these enhanced CBI powers, the ECB refers to the principle of financial independence under which an NCB must have sufficient means to perform its tasks related to the ESCB and its national tasks . As pointed out in previous ECB opinions, when allocating specific non-ESCB related tasks to the NCBs, e.g. tasks in the area of financial supervision or consumer protection, an adequate amount of human and financial resources must also be allocated in order for these tasks to be carried out in a manner which will not affect the NCBs’ operational capacity to perform their ESCB-related tasks . The CBI should therefore possess sufficient human and financial resources to efficiently perform any additional tasks introduced by the General Scheme in addition to its current tasks, and should not be adversely affected in carrying out its ESCB-related tasks, from an operational or financial point of view, due to any additional tasks introduced by the General Scheme. 2.5 The ECB looks forward to further consultation on the Credit Union Bill 2012 once it is published.

text: 3. Stabilisation Fund

text: 3.1 The General Scheme specifies in Head 30(1) that nothing in the stabilisation part of the General Scheme prevents or restricts the performance by the Governor or the CBI of functions in relation to any credit union including functions under the Central Bank and Credit Institutions (Resolution) Act 2011. This provision should also specify that nothing in the General Scheme will prejudice the compliance by the CBI with the prohibition on monetary financing under Article 123 of the Treaty . 3.2 Head 30(2) states that, subject to the consent of the Minister, the CBI may provide stabilisation support to a credit union and Head 30(2A)(a) states that before deciding to provide stabilisation support the CBI must have regard to the best use of the resources available in the Stabilisation Fund. Head 30(7) provides that the Stabilisation Fund should meet cost of the stabilisation support

text: and any other support, financial or otherwise, including costs incurred by the CBI in the exercise of its functions under this relevant part of the General Scheme, required as a condition of stabilisation support. The ECB understands that Head 30(2) in conjunction with Head 30(7) requires the stabilisation support to be provided directly from the Stabilisation Fund, and not from CBI’s funds. This understanding is confirmed by Head 32(2) which specifies that the CBI does not provide any funds to the Stabilisation Fund from its own resources. In line with this understanding, and having regard to the principle of financial independence which is part of the principle of central bank independence referred to in Article 130 of the Treaty, the General Scheme should unambiguously state either that the CBI will not provide any funding to finance the stabilisation support to credit unions or that the CBI provides stabilisation support from the Stabilisation Fund and not from its own funds. 3.3 In addition, it is unclear how the Stabilisation Fund will be financed prior to contributions being made by the credit unions. It is also unclear how stabilisation support can be provided where there are insufficient resources in the Stabilisation Fund. The ECB would welcome clarifications on these points in the General Scheme. 3.4 Under Head 44(6) of the General Scheme, in conjunction with Section 61H of the Central Bank Act 1942, the CBI may collect levies on behalf of the Rebo from credit institutions in respect of the performance by the Rebo of its functions only if the CBI and the Rebo agree on an arrangement for this purpose. The ECB expects that if the CBI enters into such an arrangement with the Rebo, the CBI’s role will remain consistent with the prohibition of monetary financing under Article 123 of the Treaty, as supplemented by

text: Regulation (EC) No 3603/93

text: , which prohibits, inter alia, any financing by a central bank of the obligations of the public sector vis-à-vis third parties and further requires an arrangement with the Rebo under Head 44(6) in conjunction with Section 61H(4) of the Central Bank Act 1942 to be without prejudice to the independence of the CBI, in particular its financial and institutional independence.

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

text: Done at Frankfurt am Main, 4 September 2012.

text: [signed]

text: The President of the ECB

text: Mario DRAGHI


title: Opinion of the European Central Bank of 7 September 2012 on a capital increase of the Banque centrale du Luxembourg (CON/2012/69)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 7 September 2012 on a capital increase of the Banque centrale du Luxembourg (

text: ) Introduction and legal basis

text: On 7 August 2012, the European Central Bank (ECB) received a request from the Banque centrale du Luxembourg (BCL) for an opinion on a draft law providing for a capital increase of the BCL and amending the Law of 23 December 1998 on monetary status and on the Banque centrale du Luxembourg, as amended (hereinafter the ‘BCL Law’), (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: on the consultation of the European Central Bank by national authorities regarding draft legislative provisions , as the draft law relates to the BCL. In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.

text: 1. Purpose of the draft law

text: The draft law provides for an increase of the BCL’s capital, by the creation of an authorised capital up to EUR 1 500 million, EUR 900 million of which will be paid up. A grand-ducal regulation may increase the paid-up capital within the limits of the authorised capital by methods such as the incorporation of reserves. Article 4 of the BCL Law, as currently drafted, refers to the initial amount of BCL capital, EUR 25 million, which may be increased without limit by incorporation of reserves by grand-ducal regulation, on a proposal from the central bank . The BCL’s authorised capital was effectively increased up to EUR 175 million in 2009, on such basis. By virtue of the draft law, the incorporation of reserves would now be authorised only within the limits of the authorised capital. The explanatory memorandum to the draft law explains that the increase in authorised capital (up to EUR 1 500 million) and paid-up capital (up to EUR 900 million) is necessary to provide the BCL with an appropriate capital base in order for it to fully and independently discharge its financial obligations within a financial system that has evolved considerably in recent years. In this latter respect, reference is made to the capital contributions to be made by the BCL to the ECB and the Bank for International Settlements (BIS), the need to finance the arrangements with the International Monetary Fund (IMF),

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

text: 2 Law of 24 October 2008. as well as the increased risks of the BCL’s day-to-day activities in the light of increased foreign exchange risks and interest rate and credit risks.

text: 2. General observations

text: 2.1 The ECB welcomes the proposed increase of the BCL’s authorised capital. The principle of financial independence requires a national central bank (NCB) within the European System of Central Banks (ESCB) to have sufficient means not only to perform its ESCB or Eurosystemrelated tasks, but also its national tasks, e.g. financing its administration and own operations. Such financial independence is assessed from the perspective of whether any third party is able to exercise either direct or indirect influence not only over an NCB’s tasks, but also over its ability to fulfil its mandate, both operationally in terms of manpower, and financially in terms of appropriate financial resources . In this respect, financial independence primarily implies that an NCB should always be sufficiently capitalised . In particular, the ECB is of the view that the higher the level of capital, reserves and provisions against financial risks is, the higher the safeguards against future losses are. For this reason, an NCB must be free to independently create financial provisions to safeguard the real value of its capital and assets. Furthermore, Member States may not hamper NCBs from building up their reserve capital to a level which is necessary for a member of the Eurosystem to fulfil its tasks . As mentioned in the ECB’s Convergence Reports 2010 and 2012 , any situation should be avoided whereby for a prolonged period of time an NCB’s net equity is below the level of its statutory capital or is even negative, including where losses beyond the level of capital and the reserves are carried over. Any such situation may negatively impact on the NCB’s ability to perform not only its ESCB or Eurosystem-related tasks, but also its national tasks. Moreover, such a situation may affect the credibility of the Eurosystem’s monetary policy. Therefore, the event of an NCB’s net equity becoming less than its statutory capital, or even negative would require that the respective Member State provides 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. The financial independence of a central bank may also be strengthened by arrangements whereby the operational costs for the discharge of some of its tasks are borne by the entities concerned by such tasks . 2.2 The ECB welcomes the increase of the BCL’s capital, as the BCL initially had a relatively ‘modest’ capital of EUR 25 million , considering: (a) the importance of the financial market in Luxembourg; and (b) that the BCL is the third largest national central bank within the

text: 3 See the ECB’s Convergence Report 2012, p. 26.

text: 4 See the ECB’s Convergence Report 2012, p. 25; See Opinion

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

text: 5 See the ECB’s Convergence Report 2012, p. 27; see also, in this regard, Opinion

text: , paragraph 4.2.

text: 6 See the ECB’s Convergence Report 2010, pp. 21 and 22 and the ECB’s Convergence Report 2012, pp. 25 and 26.

text: 7 See paragraph 2 of Opinion

text: 8 See the preparatory work on the draft law. Eurosystem in terms of liquidity granted to credit institutions and the amount of collateral used for its monetary policy operations . The Luxembourg authorities have been aware of this imbalance since the BCL’s establishment and have, for this reason, previously introduced various mechanisms intended to strengthen the BCL’s financial position without a capital increase. However, despite this, the ECB has repeatedly recommended that the BCL’s financial independence needs to be ensured . At a time of renewed need for the provision of additional liquidity to the banking sector and in order to cope with the disruption to segments of the money and financial markets that are hindering monetary policy transmission to the real economy, the BCL may need to take further additional risks on its balance sheet to continue to ensure price stability over the medium term. In this regard, it is critical at all times that the BCL possesses sufficient capital to conduct its functions and that it remains in a position to ensure the continued existence of financial buffers corresponding to the level of risks taken by it, by the replenishment of provisions and additional reserves, including retained profits, in order to constantly preserve an appropriate level of own funds.

text: 3. Capital base effectively needed by the BCL

text: 3.1 The ECB notes that, pursuant to the preparatory work on the draft law, one reason for the increase of the BCL’s capital is linked to Luxembourg’s arrangements with the IMF . The ECB understands that, further to Resolution No 66-2 on the ‘Fourteenth General Review of Quotas and Reform of the Executive Board’ adopted on 15 December 2010, the Luxembourg’s IMF quota might increase from SDR 418.7 million to SDR 1 321.8 million (a net increase of SDR 903.1 million). In its capacity as fiscal agent, the BCL would immediately contribute 25 % of such increase (SDR 225.78 million) to the IMF. In addition, Luxembourg has entered into a bilateral loan arrangement with the IMF, up to EUR 2.06 billion. 3.2 In addition to these contributions to the IMF arrangements, it is notable that the BCL already contributed SDR 65.7 million to the BIS in 2011 and will contribute EUR 8.7 million to the increased capital of the ECB. 3.3 In view of the above, the ECB recommends that the competent Luxembourg authorities closely cooperate with the BCL in order to determine the precise level of the capital increase. In this

text: 9 See, in particular, paragraph 8 of Opinion

text: 10 See Report of the Commission des Finances et du Budget (Commission of Finances and Budget in Luxembourg, 10.12.1998) on draft law No 4468/07, p. 2.

text: 11 Such mechanisms include the special BCL lien (see Article

text: . (1) of the BCL Law), the term deposit by the State of an initial amount of EUR 575 million repayable at the rate of EUR 5 million per month and for which the State authorised the BCL to set aside the returns (see the preparatory work of the draft law: such agreement also contains provisions concerning the issue of Luxembourg euro coins and the State’s guarantee in favour of the BCL in the event of losses linked to foreign exchange risks and other risks on transactions relating to the IMF and to other obligations deriving from international monetary cooperation agreements binding upon Luxembourg), as well as the reimbursement of the BCL’s costs of compilation of balance of payments by virtue of the Law of 28 June 2000’.

text: 12 See paragraph 3 of Opinion CON/98/39, Opinion

text: , paragraph 3.2 of Opinion

text: and paragraph 3.2.2 of Opinion

text: 13 See page 1 of the explanatory memorandum to the draft law. respect, it would be advisable to carefully consider the BCL’s expected day-to-day and exceptional spending needs given the recent extension of the BCL’s tasks, including possible emergency liquidity assistance, in the context of the current financial crisis. Such cooperation would serve to respect the BCL’s financial independence, but it would also take account of the fact that the BCL is best placed to assess its required level of reserve capital . 3.4 The ECB notes the distinction made in the draft law between authorised and paid-up capital, which could lead to ambiguity as to the type of ‘capital’ to which other provisions of the BCL Law refer. Furthermore, the ECB notes that the draft law restricts the flexibility that already exists in Article 4 of the BCL Law, whereby reserves might be incorporated by grand-ducal regulation, on the proposal of the BCL and without any limit, which the ECB has welcomed in Opinion

text: . The reasons for now changing

text: Article 4

text: are not transparent from the explanatory memorandum.

text: 4. Replenishment of BCL reserves

text: 4.1 As currently drafted, Article 31 of the BCL Law provides that ‘the allocation of the profit to the BCL’s reserve fund shall be compulsory so long as the total of the capital and the reserve fund falls short of the total of the BCL’s assets which do not yield freely-available income, after deduction of liabilities which form the direct counterpart of such assets’. 4.2 This provision was added by the Government in November 1998 to the then draft BCL Law in reaction to a BCL opinion that strongly recommended an overall strengthening of the BCL’s financial independence . With respect to

text: Article 31

text: , the explanatory memorandum advised that ‘in light of the unforseeability of the future financial developments, the Government does share the view that is of utmost importance to provide for a possible carry-forward and payment of a loss and to encourage the BCL to build up reserves’. This provision was intentionally drafted to mean that the BCL reserves could be indefinitely built up as long as required by the BCL balance sheet, without limiting the amount of such reserves to a specific percentage of the nominal capital. 4.3 The ECB understands that the nominal increase of the paid-up BCL capital will restrict the BCL’s ability to build up its reserves under

text: Article 31

text: , a measure which was carefully designed in 1998 under the assumption that the BCL would have a relatively modest capital. The possibility to build up and replenish reserves is very important considering, inter alia, the absence of provisions regarding the coverage of potential losses for the BCL and the ECB expects to be consulted on any amendment to

text: Article 31

text: to introduce such a mechanism.

text: 14 See the ECB’s Convergence Report 2012, p. 27; see also paragraph 2.1 of Opinion

text: 15 See paragraph 2.3.

text: 16 See the BCL opinion addressed to the President of the Luxembourg Chamber of deputies on 6 November 1998, draft law 4468/2, 4469/2, ordinary session 1998/99.

text: 17 See Opinion CON/98/39. This opinion will be published on the ECB’s website. Done at Frankfurt am Main, 7 September 2012. [signed] The President of the ECB Mario DRAGHI


text: OJ L 189, 3.7.1998, p. 42. 2 Part 3, Chapter 1 of the draft law. 3 Part 3, Chapter 3 of the draft law. 4 Part 3, Chapter 4 of the draft law.

text: Part 2 of the draft law. 6 Section 23 for DRNs, Section 52 for DSAs and Section 87 for PIAs of the draft law. 7 Section 50 for DSAs and Section 85 for PIAs of the draft law. 8 Section 67(8) for DSAs and Section 105 for PIAs of the draft law. 9 Part 4 of the draft law; especially Section 143 amending section 85(1)(automatic discharge from bankruptcy) of the Bankruptcy Act 1988. 10 Ireland: Letter of Intent, Memorandum of Economic and Financial Policies, and Technical Memorandum of Understanding of 30 May 2012 in the context of the EU-IMF Financial Support Programme for Ireland. 11 Ireland: Letter of Intent, Memorandum of Economic and Financial Policies, and Technical Memorandum of Understanding of 10 February 2012 in the context of the EU-IMF Financial Support Programme for Ireland, structural reforms, p. 12.

text: For example, the court is responsible under the draft law for approving the issue of the protective certificate, which will protect the debtor under the insolvency arrangement against creditor claims being enforced against him during the period that the protective certificate is in force. Another important role for the courts is reviewing appeals or notices of objection to approved insolvency arrangements. 13 See the explanatory memorandum to the draft law. 14 See also Opinions

text: and CON 2010//34. All ECB opinions are published on the ECB’s website at www.ecb.europa.eu. 15 Section 87(1)(a) of the draft law.

text: For instance, the restructuring plan for Permanent TSB is currently being assessed by the European Commission. See Ireland: Letter of Intent, Memorandum of Economic and Financial Policies, and Technical Memorandum of Understanding of 20 August 2012 in the context of the EU-IMF Financial Support Programme for Ireland. 17 Section 87(1)(g) of the draft law. Those criteria will further not apply in the circumstances set out in Section 87(3) of the draft law. 18 Section 100 of the draft law. 19 Section 98(1) and (2) and Section 100 of the draft law.

title: Opinion of the European Central Bank of 14 September 2012 on measures relating to personal insolvency (CON/2012/70)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 14 September 2012 on measures relating to personal insolvency (

text: ) Introduction and legal basis

text: On 25 July 2012, the European Central Bank (ECB) received a request from the Irish Minister for Finance for an opinion on the Personal Insolvency Bill 2012 (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 sixth indent of

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

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

text: 1. Purpose of the draft law

text: 1.1 The draft law introduces wide-ranging measures which seek to deal with the issue of personal debt and to modernise Irish bankruptcy law. The draft law provides alternatives to court-administered bankruptcy proceedings for insolvent debtors (individuals) by introducing three new debt settlement processes to lessen the difficulties insolvent debtors face in discharging their debts whilst enabling creditors to recover debts owed them by insolvent debtors to the extent that the means of such debtors reasonably permit. The new processes, while being under the jurisdiction of the Irish Courts, are predominantly non-judicial based processes. Briefly, these debt settlement processes are: (a) Debt Relief Notices (DRNs) , which apply to unsecured debts of up to EUR 20 000; (b) Debt Settlement Arrangements (DSAs) , which apply to unsecured debt greater than EUR 20 000; (c) Personal Insolvency Arrangements (PIAs) , which apply to both unsecured debt (of any amount) and secured debt of up to EUR 3 000 000 (hereinafter collectively referred to as the ‘insolvency arrangements’).

text: 1.2 To oversee the insolvency arrangements and to provide the necessary infrastructure, the draft law establishes the Insolvency Service of Ireland . The Insolvency Service is a new State-funded, independent corporate body responsible for performing the functions under the draft law for the operation of the insolvency arrangements. 1.3 Applications for insolvency arrangements are made to the Insolvency Service. To qualify, the debtor must be insolvent with no likelihood of becoming solvent within five years and must meet certain other specified criteria depending on the type of insolvency arrangement sought . The DRN lasts three years and the DSA and PIA can last up to five and six years respectively, during which time the debtor will be protected from creditors’ claims provided the debtor meets the terms of the insolvency arrangement. At the end of the applicable period, as prescribed by statute, the debtor is discharged from the debts specified in the insolvency arrangement. Insolvent debtors may make a proposal to enter into a DSA or PIA with their creditors via a personal insolvency practitioner who is authorised by the Insolvency Service and makes the proposal on behalf of the debtor . Before entering into effect, the proposed DSA or PIA must be agreed by the prescribed supermajority of creditors . 1.4 As regards reforming bankruptcy law and procedure, the draft law provides, amongst other amendments, for a reduction of the automatic discharge period from bankruptcy under the Bankruptcy Act 1988 from 12 to 3 years. Combining these reforms with the introduction of the insolvency arrangements, the draft law aims also to mitigate the negative impact of personal insolvency on economic activity in Ireland. 1.5 The publication of the draft law was a financial sector reform foreseen under the EU-IMF Financial Support Programme for Ireland .

text: 2. General observations

text: 2.1 The ECB generally supports the reform of personal insolvency and bankruptcy laws in Ireland as proposed by the draft law. 2.2 The ECB notes that the EU-IMF Financial Support Programme for Ireland requires the introduction of the draft law . The ECB supports the draft law’s aim of lowering the cost and increasing the speed and efficiency of personal insolvency proceedings while at the same time mitigating moral

text: hazard and maintaining credit discipline. The draft law provides for debt relief in appropriate cases. It contains provisions which aim to protect the interests of creditors by applying strict eligibility criteria to the availability of the insolvency arrangements, providing for oversight by the Insolvency Service and the Courts and requiring creditor approval by supermajority of the insolvency arrangement in appropriate cases. The ECB considers that the provisions strike a reasonable balance between the interests of creditors and debtors in coming to an insolvency arrangement. 2.3 The ECB notes, however, that the reforms are unprecedented, particularly as regards the scope of the PIA, which is the only insolvency arrangement applying to both unsecured and secured debt and hence risks impacting credit institutions that have lent to the debtor against security, e.g. mortgage loans in arrears. In addition, the reforms are being introduced without the benefit of a thorough economic impact assessment . The ECB considers that the insolvency arrangements and the supportive administrative infrastructure, whilst ambitiously conceived, should above all be workable and that these measures should not result in blanket mortgage debt forgiveness and should be geared to minimising the risk of abuse. In the absence of an impact assessment, however, it is difficult to be confident that the objectives set by the draft law will be achieved . In particular certain features of the proposed PIA regime may have negative implications for credit institutions in their capacity as creditors and even for the wider functioning of the financial system. In that regard, the ECB invites the authorities to consider the following points.

text: 3. Eligibility criteria for the PIA

text: 3.1 Threshold of debt The ECB notes that the PIA will apply to an arrangement which, inter alia, has satisfied the criterion that the aggregate of a debtor’s debts which are secured debts is less than EUR 3 000 000 . In the ECB’s view, the potential inclusion of such large amounts of secured debt in the PIA, including debt relating to a debtor’s quasi-commercial transactions, i.e. ‘buy-to-let’ mortgage loans, is unprecedented and may have significant financial implications for creditor banks if it results in deteriorating payment morale of debtors. The ECB notes that the threshold of EUR 3 million represents by many times the average amount of secured borrowings by customers of Irish banks. If made use of by large numbers of debtors, the PIAs could significantly increase

text: default rates and thus impact on both the capital adequacy and liquidity position of credit institutions at a time when they are still undergoing restructuring . The ECB, therefore, invites the authorities to take into account such considerations in the draft provisions on the PIA and to carry out an impact assessment of these provisions on creditor banks. The authorities should also consider lowering the eligibility threshold to an aggregate of secured debt of no more than EUR 1 million. 3.2 Insolvent debtor’s cooperation with creditors Furthermore, in order to qualify to make a proposal for the PIA, insolvent debtors must, inter alia, declare that they have cooperated for at least six months with their secured creditors as respects their principal private residence . It is not clear to the ECB why the evidence of good cooperation by debtors with their creditors should only be relevant when it concerns secured debt relating to a debtor’s principal private residence and not to other debts which are owed to creditors and which could be more significant. The ECB considers there is a case for debtors to be obliged to show that they have engaged in bona fide debt negotiations for a reasonable period of time with a majority of their creditors.

text: 4. Security valuation

text: The draft law provides the framework for the determination of the value of security in respect of secured debt in a PIA . This is initially an issue to be agreed by the insolvency practitioner and the creditors who are parties to the PIA. The ECB notes that the draft law contains complex provisions on the protection of secured creditors in a PIA and that the valuation of security is of central importance for the protection of their rights in that respect. This is because the draft law precludes PIAs which include terms involving retention by a secured creditor of its security and a reduction to a specified amount of the principal sum outstanding in respect of the secured debt from specifying the amount of the reduced principal sum at an amount less than the value of the security as determined in accordance with the draft law . The ECB considers that there should be legal certainty as to how such security is to be valued for the purposes of the PIA.

text: 5. Other issues

text: The ECB notes that there are a number of issues which are not regulated in the draft law but which are crucial to its effective operation. For example, the authorisation regime and compensation

text: mechanism for the personal insolvency practitioners is not specified in the draft law but will have to be regulated subsequently . The ECB also reminds the authorities of their commitment to establish a professional financial advisory service for overburdened borrowers .

text: 6. Review period

text: The draft law currently provides for a mandatory review of the PIA regime after five years from the date of its commencement. The ECB believes that for such a major reform the review period should be shorter. A reasonable period for reviewing the overall operation of the PIA regime could be after one to two years from the commencement of the regime. The review report could usefully cover such matters as the level of take up of PIAs, cases of abuse and the experience of the courts in exercising the PIAs, e.g. related competences that have been assigned to them under the draft law, including dealing with any appeals by creditors.

text: 7. Bankruptcy law reform

text: The ECB also invites the authorities to further consider reforming Irish bankruptcy law and procedure to make it more effective and also to make it easier for secured creditors to repossess mortgaged properties upon default by the debtor . No matter how successful the insolvency arrangements turn out to be, there will always be debtors who default on their specific arrangement and who will need to enter into formal bankruptcy proceedings.

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

text: Done at Frankfurt am Main, 14 September 2012. [signed]

text: The President of the ECB

text: Mario DRAGHI 20 Part 5 of the draft law on the regulation of personal insolvency practitioners. 21 See Ireland: Letter of Intent, Memorandum of Economic and Financial Policies, and Technical Memorandum of Understanding of 20 August 2012 in the context of the EU-IMF Financial Support Programme for Ireland; financial sector reforms, p. 10. 22 Part 3, Chapter 4 of the draft law. 23 Section 84 of the draft law. 24 There have been only a handful of applications for bankruptcy filed with the courts under the current bankruptcy legislation. See the Law Reform Commission Report on Personal Debt Management and Debt Enforcement of December 2010.


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

text: See the Guide to consultation of the European Central Bank by national authorities regarding draft legislative provisions. All ECB opinions and the Guide are available on the ECB’s website at www.europa.eu. In the context of recent consultations by Slovenia also referred to in Opinion

text: and Opinion

text: This view has already been provided in paragraph 4 of

text: . 4 See paragraph 2.2 of Opinion

text: and in the context of consultations by Slovenia paragraph 4.1.2 of Opinion

text: and paragraph 7 of opinion

text: . 5 See

text: Article 43(8)

text: , point 2 of the Law on banking.

text: See e.g. Opinion

text: According to the draft law, the BAMC is a joint-stock company fully owned by the State. The functions and powers of its Assembly are exercised by the Government. The Republic of Slovenia is liable for all obligations of the BAMC arising from the performance of activities under the draft law. The BAMC is subject to legal and technical supervision by the Ministry of Finance. The Statute of the BAMC is adopted and amended by the Ministry of Finance in consultation with Banka Slovenije.

text: See Annex I of Guideline ECB/2011/14 of 20 September 2011 on monetary policy instruments and procedures of the Eurosystem (OJ L 331, 14.12.2011, p. 1).

text: See Article 20 of the draft law.

title: Opinion of the European Central Bank of 19 September 2012 on strengthening bank stability (CON/2012/71)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 19 September 2012 on strengthening bank stability (

text: ) Introduction and legal basis

text: On 11 September 2012, the European Central Bank (ECB) received a request from the Slovenian Ministry of Finance for an opinion on a draft law on Slovenia’s measures to strengthen bank stability (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 and sixth indents of

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

text: 1. Purpose of the draft law

text: 1.1 The draft law regulates the Bank Assets Management Company (BAMC), the Bank Stability Fund (hereinafter the ‘Fund’) and measures to strengthen the stability of banks in Slovenia. The main purpose of the BAMC and the Fund is to strengthen the stability of banks in order to maintain the stability of the financial system as a whole. The BAMC and the Fund are established to: (a) minimise the costs of measures under the draft law, (b) recover taxpayers’ funds, (c) accelerate lending to the non-financial sector, (d) contribute to bank privatisation, and (e) clarify responsibility for the bank bad claims. 1.2 The BAMC is a joint-stock company fully owned by the State. For the purposes of the stabilisation measures under the draft law, it establishes and manages the Fund. The Fund does not have legal personality and the BAMC carries out tasks on its behalf. Under the measures in the draft law, the BAMC may, on behalf of the Fund, acquire or by any other means cover risk positions, in particular receivables, securities, derivatives, rights and obligations under approved credits or guarantees and company shares, in each case together with the pertaining collateral, acquired by financial institutions before 1 September 2012. The claims are transferred to the Fund at a price

text: reflecting their real long-term economic value. The BAMC and the Fund are established for the period until 31 December 2017. Thereafter their assets, rights and obligations will be transferred to the Slovenian Restitution Fund or its legal successor, the Slovenia Sovereign Holding. 1.3 Measures to strengthen the stability of banks provided for by the draft law are: (a) State guarantees up to a total amount of EUR 4 billion issued for the liabilities acquired by the BAMC and the Fund and the liabilities of special purpose vehicles established by banks to assume their risks; and (b) as a subsidiary measure, bank recapitalisation by way of the Fund acquiring bank shares or other own funds components. An interministerial commission decides on the measures on a proposal by the BAMC considering the importance of a particular bank for financial stability, the urgency of the measure and the efficient use of the Fund’s funds. Banks drawing on the measures have to ensure a solid and prudent business policy and prepare a business strategy to be assessed by the abovementioned interministerial commission. The BAMC can impose limitations as regards management remuneration and benefits and the distribution of dividends and other shareholders’ rights in such banks.

text: 2. Duty to consult the ECB

text: The draft law is scheduled to be discussed by the Slovenian Government on 20 September 2012. The Ministry requested the ECB to deliver its opinion as soon as possible, which effectively means that the ECB has been given a very short deadline of six working days. The ECB would like to draw the Ministry’s attention to the proper procedure for its consultations, in particular the requirement to afford the ECB sufficient time to prepare its opinion .

text: 3. Consultation on the implementing acts

text: The ECB understands that the draft law only serves as the basis for the operations of the BAMC and the Fund and for the implementation of measures for strengthening bank stability in Slovenia. More detailed rules will be set out in implementing acts to be adopted by the Government. Such implementing rules are of great relevance to the Eurosystem, for example as regards the price at which claims are transferred to the Fund and the Fund’s investment strategy and policy. Taking due account of the ECB’s fields of competence, the ECB invites the Slovenian authorities to consult it on any such implementing acts. The Slovenian authorities should ensure that requests to the ECB to issue an opinion on the implementing acts are in sufficient time to be compatible with the deadline stipulated by the draft law for the adoption of Government implementing acts (one month following the entry into force of the draft law).

text: 4. Role of Banka Slovenije

text: 4.1 Banka Slovenije is involved in the activities provided for in the draft law to a limited extent: (a) it has a consultative role in adopting the Statute of the BAMC and imposing limitations on banks drawing on the measures under the draft law, (b) it has the right to propose one of four nonexecutive members of the Management Board of the BAMC, (c) the BAMC can refer to it for the purpose of carrying out its activities, as regards the competences under the Law on banking, and (d) its representative is one of seven members of the interministerial commission deciding on the measures under the draft law. 4.2 Banka Slovenije as the banking supervisor should be more actively involved in the activities of the BAMC, in particular in any procedure identifying the banks drawing on the measures under the draft law as well as identifying and defining the value of the assets to be transferred to the Fund. The draft law could clarify how the measures under the draft law fit into the system of supervisory measures taken by Banka Slovenije within its supervisory competence pursuant to the Law on banking. The ECB would therefore suggest explicitly providing for an appropriate role of Banka Slovenije either in the draft law or in any other relevant legal act .

text: 5. Bank recapitalisation by the Fund and eligibility of bonds issued by the BAMC as collateral in Eurosystem operations

text: 5.1 In accordance with Article 20 of the draft law, the Fund can participate in the recapitalisation of banks, in particular by acquiring shares and taking over other own funds items. The Ministry decides on the acquisition and disposal of shares. 5.2 As consistently expressed in its opinions , the ECB generally prefers issuances of shares against a cash contribution for financial stability reasons. Recapitalisation against non-cash contributions may in this case be carried out only if the bank share capital increase is based on an additional measure of Banka Slovenije . Such investment in banks of the bonds issued by the State-owned BAMC is not desirable from the financial stability perspective as it reinforces the link between the State and the banking sector. 5.3 In accordance with Article 10 of the draft law, the BAMC may issue bonds and other financial instruments guaranteed by the State to finance the purchase of bank bad claims. Such bonds and other financial instruments can be paid by a transfer of bank claims to the Fund and according to the draft law, they should comply with the ECB’s conditions for financing of financial institutions. 5.4 The draft law does not fully exclude the bonds and financial instruments issued by the BAMC from being used for the purpose of recapitalisation of banks. As stated in previous ECB opinions , where a recapitalisation of a credit institution to restore its solvency takes place by way of direct

text: placement of State-issued debt instruments, the subsequent use of such bonds or financial instruments as collateral in central bank liquidity operations would raise monetary financing concerns in the absence of any alternative market-based funding sources for such State-issued debt instruments. The same concerns would arise should the bonds and financial instruments issued by the BAMC be used for the bank recapitalisation. 5.5 As regards the provision of the draft law that financial instruments issued by the BAMC will meet the ECB’s conditions for financing of financial institutions , the ECB understands that the BAMC is under an obligation to shape the instruments it issues to meet the requirements for eligible collateral for Eurosystem monetary policy operations . The ECB emphasises that it is the prerogative of the Eurosystem to decide whether collateral fulfils the criteria of its collateral framework on the basis of any information it may consider relevant.

text: 6. Fiscal implications of the draft law

text: 6.1 The draft law provides for various sources of funding, including bond issuance, Government deposits with banks and State borrowing . In accordance with Article 12 of the draft law, the State can borrow additional funds to finance the Fund notwithstanding the provisions of the Law on public finance. The draft law, however, does not define under which circumstances and by how much the State is entitled to borrow additional funds. Thus, the draft law could imply significant fiscal costs, although the draft law inter alia aims at ‘minimising the costs of measures’ and ‘recovering taxpayers’ funds’ . 6.2 In this context, it should be also specified how to value the transferred claims to the Fund and whether a discount factor will be applied, as this determines the required funding and the potential fiscal costs. 6.3 In addition, to limit the potential fiscal implications the draft law could set out limits regarding the recapitalisation of banks in which the Fund could also participate . While a limit exists for State guarantees , the involvement in bank recapitalisation is not limited.

text: 7. Governance and competences of the BAMC

text: 7.1 In accordance with Article 7 of the draft law, the BAMC’s Management Board is composed of seven directors appointed by the Government. It is recommended to appoint a number of independent directors to the Management Board to allow the BAMC to better resist the potential pressure from borrowers and prospective purchasers of assets seeking preferential treatment. While still possible under the abovementioned provision of the draft law, the appointment of independent directors is not expressly stipulated. 7.2 Article 18(1) of the draft law provides that the interministerial commission decides on the use of the measures under the draft law. The draft law could be more explicit as to which types of decisions would be taken by the interministerial commission and which decisions will be delegated to the BAMC Management Board in its day-to-day operations.

text: Done at Frankfurt am Main, 19 September 2012.

text: [signed]

text: The President of the ECB

text: Mario DRAGHI


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

text: Dziennik Ustaw (Dz. U.) of 2011 No 199, item 1175.

text: OJ L 267, 10.10.2009, p. 7.

text: Dz. U. of 2002 No 169, item 1385. 5 Dz. U. of 2002 No 72, item 665. 6 The transferred provisions regulate, inter alia, the settlement of direct debit transactions where one of the providers comes from outside the European Union. 7

text: Articles 15

text: a–c of the Law on payment services as inserted by

text: Article 1(5)

text: (b) of the draft law. 8 See proposed

text: Article 6

text: a of the Law on payment services. 9 Services based on instruments that can be used to acquire goods or services only in the premises used by the issuer or under a commercial agreement with the issuer either within a limited network of service providers or for a limited range of goods or services, exempted under Article 6(11) of the Law on payment services. 10 Proposed

text: Articles 15

text: a(3), 15b(3) and 15c(3) of the Law on payment services. 11 Exercised under the Law of 24 August 2001 on settlement finality in payment systems and securities settlement systems and supervision over such systems (Dz. U. of 2010 No 112, item 743); see

text: Article 16(1)

text: . 12 According to proposed Article 60(3) of the Law on payment services, the KNF Chair would be obliged to consult the NBP President whenever an application for authorisation as a payment institution covers the provision of acquiring services.

text: Referred to in Polish legislation as ‘authorisation and clearing systems’. 14 See the proposed definition of ‘acquiring’ in

text: Article 3(1)

text: (5) of the Law on payment services as amended by

text: Article 1(3)

text: (b) of the draft law; see also the explanatory memorandum to the draft law, p. 13. 15 According to Article 60(1) of the Law on electronic payment instruments, ‘during the period of validity of the contract’ the holder of electronic money may demand that the issuer redeem the electronic money ‘at any time’. The draft law removes the qualification relating to the period of the contract (see proposed

text: Article 59

text: i of the Law on payment services). At the same time, the draft law modifies the time limit for such requests for redemption by replacing the 10-year time limit (applicable under the general rules of civil law) with a five-year time limit (applicable specifically to the requests for redemption of electronic money) running from when the relevant contract concerning the issuance of electronic money is terminated (see proposed

text: Article 59

text: l of the Law on payment services). 16 See

text: Article 11(2) of Directive 2009/110/EC

title: Opinion of the European Central Bank of 21 September 2012 on a consolidated legal framework for payment services (CON/2012/72)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 21 September 2012 on a consolidated legal framework for payment services (

text: ) Introduction and legal basis

text: On 20 August 2012, the European Central Bank (ECB) received a request from the Polish Minister for Finance for an opinion on a draft law amending the Law on payment services and certain other laws (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 and fifth indents of

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

text: on the consultation of the European Central Bank by national authorities regarding draft legislative provisions , as the draft law relates to Narodowy Bank Polski (NBP) and to payment 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 law

text: 1.1 The draft law amends the Law of 19 August 2011 on payment services (hereinafter the ‘Law on payment services’) to fully transpose in the Polish legal system Directive

text: of the European Parliament and of the Council of 16 September 2009 on the taking up, pursuit and prudential supervision of the business of electronic money institutions amending Directives

text: and

text: and repealing Directive

text: . 1.2 In addition to transposing Directive

text: , the draft law introduces certain other amendments. The main areas where the proposed amendments go beyond the strict transposition of Union directives include, inter alia: (a) recast of the various legal provisions concerning payment services currently contained in several legal acts, and consolidation in the Law on payment services, thereby creating a single act which comprehensively regulates the payment services market, including the operation and supervision of electronic money institutions. To this end, the draft law:

text: (i) repeals the Law of 12 September 2002 on electronic payment instruments (hereinafter the ‘Law on electronic payment instruments’) and transfers most of its provisions to the Law on payment services. Following such consolidation, general provisions concerning payment institutions will apply to electronic money institutions, while issues requiring detailed electronic money-specific regulation will be included in the proposed new Chapter VIIa of the Law on payment services; (ii) transfers to the Law on payment services those provisions of the Law of 29 August 1997 on banking which regulate certain aspects of the payment services market ; (iii) amends and aligns payment services-related definitions and terminology; (b) with a view to ensuring that NBP, as the overseer of payment systems, has access to the relevant payment services market data, the data reporting obligations of acquirers, electronic money issuers and payment instrument issuers are extended to also cover certain services exempted from the application of the Law on payment services . At the same time, the draft law provides for the sharing of such information with the Financial Supervision Authority (KNF) ; (c) under the provisions currently in force, NBP’s oversight and licensing powers over payment systems are applied mutatis mutandis to non-banking providers of acquiring services; the draft law redefines the concept of acquiring services and replaces these NBP oversight and licensing powers with consultative powers .

text: 2. General observations

text: In accordance with Decision

text: , this opinion only addresses those provisions of the draft law relating to NBP and payment systems which go beyond the strict transposition of Union directives. While acknowledging the importance of Directive

text: , its transposition into national law is not addressed in this opinion.

text: 3. Specific observations

text: 3.1 The ECB welcomes the consolidation of the various legal provisions concerning the payment services market in a single act, as it will increase the clarity and consistency of interpretation and application of the entire legal framework for payment services in Poland. 3.2 The ECB understands that, as a result of abolishing NBP’s oversight and licensing powers over non-banking providers of acquiring services, such providers will no longer be subject to a dual licensing regime, consisting of: (i) authorisation as payment services providers – by the KNF; and (ii) authorisation as operators of acquiring systems – by NBP. This change will result in a single supervisory and licensing regime for all payment institutions, including those providing acquiring services, and should remove doubts currently arising over the application of the dual licensing regime. At the same time, the central bank’s role has been clearly defined by enabling its involvement in licensing acquirers, in the form of opinions to be issued by the NBP President, and by defining the scope of acquiring services to exclude any elements of clearing and settlement, thereby ensuring that the new framework is without prejudice to NBP’s oversight and licensing powers over payment systems . 3.3 The draft law amends the rules on the redeemability of electronic money . In this context, the ECB refers to the importance of redeemability as a means to ensure confidence in electronic money as an effective and reliable substitute for coins and banknotes, and the relevant provisions of Directive

text: which provide for unlimited redeemability .

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

text: Done at Frankfurt am Main, 21 September 2012. [signed]

text: The President of the ECB

text: Mario DRAGHI