text: OJ L 189, 3.7.1998, p. 42. 3 The reference to the King is understood as a reference to the Belgian Government. 4 Article 2 of the draft law, introducing a new

text: Article 117

text: bis into the Law of 2 August 2002 on the supervision of the financial sector and on financial services.

text: The laws concerned, as listed in Article 2 of the draft law, are as follows: (i) the Law of 22 March 1993 on the status and supervision of credit institutions; (ii) the Law of 6 April 1995 on the status and supervision of investment firms; and (iii) the Law of 2 August 2002 on the supervision of the financial sector and on financial services. 6 See Article 12 of the Law of 22 February 1998 establishing the organic statute of the Nationale Bank van België/Banque Nationale de Belgique (hereinafter the ‘NBB Law’). 7 Article 6 of the draft law amending Article 9 of the NBB Law. 8 See the commentary on

text: Article 12

text: in the explanatory memorandum to the draft law, p. 7. 9 See especially

text: Articles 3

text: and

text: Articles 8

text: to 11 of the draft law concerning the structure of the NBB Law, as well as Article 7 of the draft law. 10 Under

text: Article 7

text: , first subparagraph, of the NBB Law, ‘[the NBB]’s claims arising from credit transactions shall entail a preferential claim on all securities which the debtor holds in an account with the [NBB] or in its securities clearing system as his own assets.’ 11

text: Article 2

text: bis of the draft law. 12 Proposed

text: Article 117

text: bis, second paragraph of the Law of 2 August 2002. 13 See ECB Opinion

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

text: See the ECB Financial Stability Review, December 2006, pp.171-172 and the ECB’s Annual Report 1999, p. 98. 16 See ECB Opinion

text: of 10 September 2008 at the request of the Banque centrale du Luxembourg on amendments to the draft law improving the legislative framework for Luxembourg as a financial centre and amending the Law of 23 December 1998 on monetary status and on the Banque centrale du Luxembourg, paragraphs 4.9 to 4.11. 17 Alternatively, a reference to the same level of independence as provided for in Article 108 of the Treaty could be considered (see ECB Opinion

text: , paragraph 4.11, footnote 20).

text: See

text: Article 237

text: (d) of the Treaty. 19 Since 2006, the ECB’s Convergence Report has included an assessment of the compatibility of national legislation with the monetary financing prohibition. 20 See ECB Opinion

text: , footnote 16. 21 See the ECB’s Convergence Report May 2006, p. 68; the Convergence Report December 2006, p. 30; the Convergence Report May 2007, p. 22 and the Convergence Report May 2008, p. 24, all of which are available on the ECB’s website at www.ecb.europa.eu. 22 See the explanatory memorandum to the draft law, p .3. 23 ECB Opinion

text: , paragraph 4.11.

text: See Article 2 of the draft law. The laws concerned are the following: (i) the Law of 22 March 1993 on the status and supervision of credit institutions; (ii) the Law of 6 April 1995 on the status and supervision of investment firms; and (iii) the Law of 2 August 2002 on the supervision of the financial sector and on financial services. 26 As published on the ECB website, www.ecb.europa.eu.

title: Opinion of the European Central Bank of 8 October 2008 at the request of the Belgian Ministry of Finance on a preliminary draft law on measures promoting financial stability and in particular establishing a State guarantee for the provision of credit in the context of financial stability (CON/2008/46)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 8 October 2008 at the request of the Belgian Ministry of Finance on a preliminary draft law on measures promoting financial stability and in particular establishing a State guarantee for the provision of credit in the context of financial stability (

text: ) Introduction and legal basis

text: On 3 October 2008 the European Central Bank (ECB) received a request from the Nationale Bank van België/Banque Nationale de Belgique (NBB), acting on behalf of the Belgian Ministry of Finance, for an opinion on a preliminary draft law on measures promoting financial stability and in particular establishing a State guarantee for the provision of credit in the context of financial stability (hereinafter the ‘draft law’). Given the current turbulence in the international financial markets, the consulting authority has requested the ECB to provide its opinion urgently to allow the draft law to be adopted as quickly as possible. The ECB’s competence to deliver an opinion is based on Article 105(4) of the Treaty establishing the European Community and on the third and sixth indents of

text: 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 the NBB and to 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 draft law

text: 1.1 The draft law is motivated by the current financial market crisis and by the willingness of the Belgian authorities to reinforce the means available to them to take measures with a view to preserving confidence in the national financial system . First, the draft law introduces into Belgian law a legal basis empowering the King (hereinafter the ‘Belgian executive’) to take any urgent measures with a view to preserving the stability of the financial system . The Belgian executive may, after consulting the Financial Stability Committee, take any measure to preserve the stability

text: of the financial system in the event of a sudden financial market crisis or of a serious threat of a systemic crisis, including temporary derogations from certain prudential laws applicable to the financial sector . Second, the draft law establishes a State guarantee covering the NBB for credits extended in the context of the NBB’s contribution to financial stability under its organic law and provides to this end that ‘the State shall … guarantee to the [NBB] the repayment of any credit granted in the context of its contribution to the stability of the financial system and shall guarantee the [NBB] against any loss due to any transaction necessary in this respect’ . This provision of the draft law would enter into force retroactively, on 28 September 2008. The Belgian authorities consider this retroactivity justified by the circumstance that it is ‘indispensable to safeguarding financial stability that the [NBB] [was] able to grant emergency liquidity with a State guarantee on 29 September 2008’ . 1.2 The draft law aims at remedying certain ambiguities in the NBB Law created by the distinction made currently in the structure of the NBB Law between tasks that are within the domain of the European System of Central Banks (ESCB) and tasks which are not, which the draft law proposes should no longer be made . In this context, the draft law clarifies for instance that the lien granted to the NBB under the NBB Law is not limited to the NBB’s claims arising from credit transactions carried out in the context of its ESCB-related tasks but also applies in the context of its non ESCB-related tasks .

text: 2. General observations

text: 2.1 The application of the special powers granted to the Belgian executive under the draft law with a view to preserving the stability of the financial system requires the adoption of royal decrees . Although the ECB understands that, under the draft law, these draft royal decrees are intended to be adopted under a ‘fast-track’ procedure and will not for instance require the opinion of the Belgian Council of State, this does not prejudice the duty to consult the ECB under Article 105(4) of the Treaty on such draft royal decrees, should they fall within the ECB’s advisory competences. 2.2 As already mentioned in a recent ECB opinion on another draft national law relating to emergency measures arising out of the current financial turmoil , the ECB is of the view that it is important

text: for national authorities to seek to coordinate their responses to the current financial situation with their EU partners. As a general matter, the ECB wishes to underline the importance it attaches to ensuring that the draft law, and any subsequent royal decrees, fully comply with the relevant provisions of Community law, including State aid rules.

text: 3. Provision of emergency liquidity assistance by national central banks

text: 3.1 One of the specific tools available to central banks in a crisis situation is the provision of emergency liquidity assistance to individual banks . This tool consists of liquidity assistance provided by central bank in exceptional circumstances and on a case-by-case basis to temporarily illiquid but solvent institutions. 3.2 The extension of emergency liquidity assistance falls within the NBB’s task of contributing to the stability of the financial system, which is set out in Article 12 of the NBB Law. Under the draft law, the State must guarantee to the NBB the repayment of any credit granted in the context of its contribution to the stability of the financial system and must guarantee the NBB against any loss due to any transaction necessary in this respect. The ECB notes that, in the explanatory memorandum to the draft law, the particular responsibility of the NBB in the event of a crisis is highlighted since, as the lender of last resort in the national financial system, it must evaluate if it is going to assist banks in difficulty by providing emergency liquidity. It is also pointed out that providing such emergency liquidity is an autonomous decision that the NBB must be in a position to take in exceptional circumstances and complete independence . 3.3 As expressed in a recent opinion regarding another draft national law addressing the provision of emergency liquidity assistance by a Eurosystem central bank , the ECB is of the view in this case that the draft law should unequivocally ensure the NBB’s independence to decide on the provision of emergency liquidity assistance. To this end, the draft law should stipulate that the same degree of independence is granted to the NBB as regards the provision of emergency liquidity assistance as with respect to the performance of its ESCB-related tasks . 3.4 The ECB notes that, except as regards tasks and transactions within the domain of the ESCB, Article 22(1) and 22(2) of the NBB Law provide for the possibility for the Minister of Finance (or their representative) to suspend and/or oppose transactions, measures and/or decisions adopted by the NBB which are contrary to the NBB Law, the NBB’s statutes or the interests of the State. In this context and in view of the need to ensure the NBB’s full independence in providing emergency liquidity assistance, the ECB would like to take the opportunity of this consultation to draw the attention of the Belgian authorities to the need to clarify these provisions, for instance by expressly excluding Article 12 of the NBB law from their scope.

text: 4. State guarantee and the prohibition on monetary financing

text: 4.1 The monetary financing prohibition, as defined in Article 101 of the Treaty, is essential to ensure that the primary objective of monetary policy, namely to maintain price stability, is not impeded. Therefore, the prohibition must be interpreted extensively in order to ensure its strict application. It is noted that, under

text: Article 237

text: (d) of the Treaty, the ECB is entrusted with the task of monitoring the compliance of the NCBs with the prohibition on monetary financing and, as pointed out in a recent opinion, it is important, in the case of emergency liquidity assistance supported by a State guarantee, to provide for appropriate legal safeguards in terms of central bank independence and compliance with the monetary financing prohibition . 4.2 The provision of emergency liquidity assistance is a central bank function, which consists in giving support in exceptional circumstances and on a case-by-case basis to temporarily illiquid but solvent credit institutions . However, it is the ECB’s view that ‘national legislation foreseeing the financing by NCBs of credit institutions other than in connection with central banking tasks (such as monetary policy, payment systems or temporary liquidity support operations), in particular to support insolvent credit and/or other financial institutions, is incompatible with the monetary financing prohibition’ . In this respect the ECB notes the clarification contained in the explanatory memorandum to the draft law, which states that a central bank extension of financial support to an insolvent financial institution must be considered as a form of prohibited monetary financing . The ECB is of the view that this clarification should be contained in the draft law itself. In the same vein, it would be advisable to introduce into the draft law a direct reference to the prohibition on monetary financing as defined in Community law or alternatively to Article 101 of the Treaty . 4.3 Under the draft law, the State must guarantee to the NBB the repayment of any credit granted in the context of the NBB’s contribution to the stability of the financial system and it must guarantee the NBB against any loss due to any transaction necessary in this respect. In order for emergency liquidity assistance provided with a State guarantee as collateral, as provided for in the draft law, to comply with the monetary financing prohibition, the following criteria should be met. First, as regards the need for the NBB to independently exercise full discretion regarding the decision whether to extend emergency liquidity assistance, the ECB notes that the NBB will take its decision fully independently, see however paragraphs 3.3 and 3.4, and that, while the NBB and the Commissie voor het Bank-, Financie- en Assurantiewezen/Commission Bancaire, Financière et des Assurances must inform the Minister for Finance in the event of a crisis endangering the financial

text: sector, the State guarantee is nevertheless granted ex ante under the draft law and provided automatically without the need for any prior agreement of the Minister for Finance. Second, it should be ensured that the credit provided by the NBB is as short term as possible. The ECB would welcome any clarification in this regard, at least in the explanatory memorandum to the draft law. Third, there must be systemic stability aspects at stake. In the present case, the ECB understands that the granting of the above credit would be part of the NBB’s statutory contribution to the stability of the financial system. Fourth, there must be no doubts as to the legal validity and enforceability of the State guarantee under Belgian law. In this respect, the ECB welcomes the fact that the establishment of the State guarantee is enshrined in the draft law. Fifth, there must be no doubts as to the economic adequacy of the State guarantee, which should cover both principal and interest on the loans, thus fully preserving the financial independence of the NBB. The State guarantee in this case is very broad since it covers any losses related to any operations necessary in the context of the NBB’s contribution to financial stability.

text: 5. Financial stability and exceptional derogations from supervisory rules

text: Under the draft law, the Belgian executive may take any measure to preserve the stability of the financial system in the event of a sudden financial market crisis or of a serious threat of a systemic crisis, including temporary derogations from the supervisory rules applicable to the financial sector . The ECB is of the view that this broad provision might be further clarified with a view to enhancing legal certainty and to ensuring its compatibility with Community law. Moreover, and as mentioned above, measures which are adopted with the aim of safeguarding financial stability should involve cooperation with the relevant authorities of the Member States, in line with applicable Community legislation and the arrangements in place, such as the Memorandum of Understanding on cooperation between the financial supervisory authorities, central banks and finance ministries of the European Union on cross-border financial stability . The ECB would also favour the adoption of common policy solutions at the European level on these issues rather than uncoordinated national legislative initiatives. The ECB is of the opinion that national law should expressly include this need for coordination at the European level.

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

text: Done at Frankfurt am Main, 8 October 2008.

text: [signed]

text: The President of the ECB

text: Jean-Claude TRICHET


text: EGT L 189, 3.7.1998, s. 42. 2 Riksbankens tillkännagivande om tillämpade regler vid inlösen av skadade sedlar m.m., Riksbankens författningssamling, beslut av den 21 oktober 1993. 3 Se ECB:s yttrande

text: av den 25 September 2007 på begäran av Narodowy Bank Polski om ett utkast till förordning om metoder och förfaranden för räkning, sortering, paketering och märkning av förpackade sedlar och mynt samt genomförandet av åtgärder i samband med försörjningen av banker med sedlar och mynt och ECB:s yttrande

text: av den 16 juni 2008 på begäran av Narodowy Bank Polski om ett utkast till förordning om ändring av

text: principerna och förfarandena för utbyte av sedlar och mynt som, till följd av förslitning eller skada, upphört att vara lagligt betalningsmedel i Polen. 4 EUT L 78, 25.3.2003, s. 16. 5 Artikel 3.1 i beslut ECB/2003/4.

text: Finns på ECB:s webbplats www.ecb.europa.eu. Motsvarande regler för euromynt finns i kommissionens rekommendation av den 27 maj 2005 om äkthetskontroll av euromynt och hantering av euromynt som inte är lämpliga för cirkulation (delgivet med nr K(2005) 1540).

publisher: Europeiska centralbanken

sprak: sv

title: Europeiska centralbankens yttrande av den 9 oktober 2008 på begäran av Sveriges riksbank om ett förslag till Riksbankens föreskrifter om inlösen av sedlar och mynt (CON/2008/47)

serie: con

text: EUROPEISKA CENTRALBANKENS YTTRANDE av den 9 oktober 2008 på begäran av Sveriges riksbank om ett förslag till Riksbankens föreskrifter om inlösen av sedlar och mynt (

text: ) Inledning och rättslig grund

type: rubrik

text: Den 21 augusti 2008 mottog Europeiska centralbanken (ECB) en begäran från Sveriges riksbank om ett yttrande över ett förslag till Riksbankens föreskrifter om inlösen av sedlar och mynt (nedan kallat utkastet till föreskrifter). ECB:s behörighet att avge ett yttrande grundas på artikel 105.4 i fördraget om upprättandet av Europeiska gemenskapen och artikel 2.1 andra och tredje strecksatserna i

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

text: om nationella myndigheters samråd med Europeiska centralbanken rörande förslag till rättsregler , eftersom förlaget till rättsregler rör betalningsmedel och Sveriges riksbank. I enlighet med

text: artikel 17.5

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

type: stycke

text: 1. Syftet med utkastet till föreskrifter

text: Utkastet till föreskrifter ska ersätta RBFS 1993:5 som innehåller bestämmelser om ersättning för sedlar som skadats, förstörts, eller upphört att vara lagligt betalningsmedel samt för inlösen av avsiktligt ändrade sedlar eller mynt.

text: 2. Allmänna kommentarer

text: Eftersom Sverige är en medlemsstat med undantag enligt artikel 122 i fördraget gäller ECB:s krav beträffande organisationen av nationella kontanthanteringskedjor i de medlemsstater som har infört euron för närvarande inte för Riksbanken, men dessa krav kommer att gälla även för Riksbanken så snart Sverige inför euron och Riksbanken blir en fullt integrerad medlem av Eurosystemet. Bestämmelserna i utkastet till föreskrifter om inlösen av sedlar eller mynt avviker delvis från de bestämmelser som gäller inom Eurosystemet. Innan Sverige inför euron måste dessa bestämmelser anpassas till Eurosystemets

text: standarder, särskilt beslut ECB/2003/4 av den 20 mars 2003 om valörer, tekniska specifikationer, reproducering, inlösen och indragning avseende eurosedlar . Enligt artikel 106 i fördraget har ECB ensamrätt att tillåta sedelutgivning inom gemenskapen medan medlemsstaterna får ge ut mynt i den omfattning som godkänns av ECB. Följaktligen gäller Eurosystemets regleringsbehörighet endast sedlar. Mot bakgrund av att nya nationella centralbanker kan komma att ansluta sig till Eurosystemet, förordar ECB att man tydligt och konsekvent gör åtskillnad mellan sådana nationella regler som rör sedlar och sådana som rör mynt. ECB anser därför att utkastet till föreskrifter skulle förbättras om man i utkastet konsekvent gjorde åtskillnad mellan sådana regler som rör sedlar och sådana som rör mynt. Detta skulle underlätta den rättsliga konvergensen av den svenska lagstiftningen som är nödvändig för att Sverige ska kunna bli en fullvärdig medlem av EMU.

text: 3. Specifika kommentarer

text: 3.1 Inlösen av förstörda sedlar ECB noterar att strukturen av 1 § punkterna 1 och 2 i utkastet till föreskrifter vänder på vad som framgår av artikel 3.1 och 3.2 i beslut ECB/2003/4, där den intakta yta som krävs för inlösen av eurosedlar anges som regel och tvivel avseende inlämnarens äganderätt till eurosedeln eller sedelns äkthet anges som undantag samtidigt som inlämnaren ges bevisbördan. ECB föreslår att Sveriges riksbank övertar ECB:s formulering i denna del av utkastet till föreskrifter. Av 1 § andra stycket i utkastet till föreskrifter framgår att Riksbanken löser in skadade och förstörda sedlar med hela beloppet om en intakt yta motsvarande minst två tredjedelar av hela sedeln återstår, och med halva beloppet om en intakt yta motsvarande mindre än två tredjedelar men mer än en tredjedel återstår. Dessa bestämmelser avviker från ECB:s regler avseende eurosedlarna enligt vilka de nationella centralbankerna i Eurosystemet får lösa in eurosedlar till hela beloppet om mer än 50 procent av eurosedeln ges in (vare sig hel eller i bitar), eller om 50 procent eller mindre av eurosedeln ges in och inlämnaren kan visa att återstoden av sedeln har förstörts . 3.2 Ingen inlösen av förfalskade sedlar eller mynt I 1 § och 3 § i utkastet till föreskrifter skulle det vara bra att ange att Riksbanken endast löser in sådana skadade och förstörda sedlar och mynt som är äkta. 3.3 Stöldskyddsutrustning omnämns inte ECB noterar också att utkastet till föreskrifter inte innehåller några bestämmelser, som t.ex. i

text: artikel 3.2 b

text: till d i beslut ECB/2003/4, för hur sedlar som är färgade eller på annat sätt skadade genom stöldskyddsutrustning ska hanteras om de lämnas in till Riksbanken. ECB föreslår att Riksbanken

text: undersöker möjligheten att uttryckligen ta med sådana bestämmelser, eftersom stöldskyddsutrustning används allt oftare av kreditinstitut och andra som yrkesmässigt hanterar kontanter.

text: 4. Harmonisering med ECB:s ramverk för upptäckt av förfalskningar och för kvalitetssortering

text: ECB föreslår att Riksbanken överväger att, i möjligaste mån, harmonisera sina nationella regler med respektive övergångsregler för genomförandet av ECB:s Ramverk för upptäckt av förfalskningar och för kvalitetssortering av kreditinstitut och andra som yrkesmässigt hanterar kontanter . Detta skulle underlätta den rättsliga konvergensen av den svenska lagstiftningen och underlätta för Sverige att bli en fullvärdig medlem av EMU.

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

text: Utfärdat i Frankfurt am Main den 9 oktober 2008.

text: [Namnteckning]

text: Jean-Claude TRICHET

text: ECB:s ordförande

type: vagledning

utgivare: ecb


text: The draft scheme and the updated draft scheme are only referred to specifically in this opinion where a distinction needs to be made between them. Otherwise the legislative provisions to be adopted are referred to as the ‘scheme’.

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

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

text: See paragraph 9 of the Schedule to the scheme. The scheme does not concern other types of financial support which may be provided by the Minister under the Act, such as, for example, the Minister’s authority to purchase shares in a supported credit institution under Section 6(9) of the Act. 7 The charge is to be credited to a designated account to be maintained at the Central Bank as a reserve for any payments to be made under the scheme (see paragraphs 15A-21 of the Schedule to the draft scheme (paragraphs 16-23 of the Schedule to the updated draft scheme), together with the Annex (Guarantee Charging Model) to the Schedule). 8 See the press release of the 2894th Council meeting (13784/08), available on the Council website, www.consilium.europa.eu.

text: See the declaration of 12 October 2008, available on the website of the French Presidency at www.ue2008.fr. 10 See in particular paragraphs 2.3 and 3.2 of Opinion

text: , as reiterated in paragraphs 3.4 and 3.7 of this opinion. 11 See, e.g. ECB Opinion

text: of 8 October 2008 at the request of the Belgian Ministry of Finance on a preliminary draft law on measures promoting financial stability and in particular establishing a State guarantee for the provision of credit in the context of financial stability. All ECB opinions are available on the ECB website at www.ecb.europa.eu/ecb/legal/opinions/html/index.en.html. 13 See paragraph 5 of the Schedule to the updated draft scheme. 14 See paragraph 12 of the Schedule to the updated draft scheme.

text: See the 30 September 2008 press release, available on the Department for Finance’s website at www.finance.gov.ie. Cf. paragraph 19 of ECB Opinion

text: . 16 See the 9 October 2008 press release, available on the Department for Finance’s website at www.finance.gov.ie. 17 See the list of the Governor’s relevant powers in paragraph 3.1 of ECB Opinion

text: . 18 The financial stability powers of the Governor under the Central Bank Acts include: (i) expressing agreement to actions by the Regulatory Authority on any matter relating to the financial stability of Ireland’s financial system, including (but not limited to) the issue, revocation and suspension of a license or other authority; (ii) authorising investigations and onsite inspections of licensed credit institutions; (iii) the issuance of guidance as to policies and principles that the Regulatory Authority is required to implement in performing the Central Bank’s functions; and (iv) requesting the Regulatory Authority’s advice, information and assistance. See Sections 33C(1)(c), 33C(8), 33C(9), 33C(9A), 33C(9B) and 33D(1)-(2) of the Central Bank Act 1942; Section 17A of the Central Bank Act 1971; Section 41 of the Central Bank Act 1989. 19 See paragraph 2.3 of ECB Opinion

text: . 20 See paragraph 2, fourth bullet point, of the Schedule to the draft scheme (paragraph 2.5 of the Schedule to the updated draft scheme).

text: See the Explanatory Memorandum Relating to a Scheme Dated X day of October 2008, pp. 2-4. 22 See in particular the safeguards introduced by paragraph 36 of the updated draft scheme. 23 See the Commission press release IP/08/1497 of 13 October 2008. The non-confidential version of the Commission’s decision will be made available under Case NN 48/2008. The Commission took account, in particular of the provision of the updated draft scheme stating that the Minister may review and vary the scheme at no later than six-month intervals, and the results of such review will be provided to the Commission (see paragraph 8 of the Schedule to the updated draft scheme). See also ‘Communication from the Commission – The application of State aid rules to measures taken in relation to financial institutions in the context of the current global financial crisis’ of 13 October 2008, available at the Commission’s website at www.ec.europa.eu. 24 Cf. paragraph 2.3 of ECB Opinion

text: . 26 See paragraph 12 of the Schedule to the updated draft scheme.

text: See paragraph 10, second bullet point of the draft scheme and paragraph 10.2 of the Schedule to the updated draft scheme. 28 See paragraph 10, third, fourth and fifth bullet points of the draft scheme and paragraph 10.3-10.5 of the Schedule to the updated draft scheme. 29 See paragraph 10 of the Schedule to the draft scheme. 30 See Section 6(2) of the Act. 31 Any secured lending by the Central Bank to covered institutions, e.g. as part of the Central Bank’s Eurosystem credit or emergency lending operations would not appear to be covered by the scheme. 32 If the intention behind this proposal was to exclude obligations arising out of Eurosystem monetary policy and intraday credit operations, care would need to be taken that such an exclusion did not also require a reappraisal of the eligibility of senior unsecured debt securities and covered bonds issued by Irish credit institutions covered by the scheme in connection with the collateralisation of Eurosystem credit operations. 33 See Section 6(2) of the Act.

text: See paragraph 4.3 of ECB Opinion

text: . This opinion specified the following criteria under which a central bank may engage in lending to a solvent credit institution on basis of a collateral in the form of a State guarantee: (i) the central bank needs to independently exercise full discretion regarding the decision whether to extend emergency liquidity assistance; (ii) it should be ensured that the credit provided by the central bank is as short term as possible; (iii) there must be systemic stability aspects at stake; (iv) there must be no doubts as to the legal validity and enforceability of the State guarantee under applicable national law; and (v) there must be no doubts as to the economic adequacy of the State guarantee, which should cover both principal and interest on the loans, thus fully preserving the financial independence of the central bank. 35 See paragraph 3.2(iii) of ECB Opinion

text: . 36 See paragraph 10, first bullet point of the Schedule to the draft scheme (paragraph 10.1 of the Schedule to the updated draft scheme). 37 See paragraph 11 of the Schedule to the draft scheme (paragraph 12 of the Schedule to the updated draft scheme). 39 For example, the Irish Bankers’ Federation Code of Practice on Mortgage Arrears and the Regulatory Authority’s Consumer Protection Code (see paragraph 24 of the Schedule to the draft scheme (paragraph 26 of the Schedule to the updated draft scheme)). 40 See paragraph 25 of the Schedule to the draft scheme (paragraph 27 of the Schedule to the updated draft scheme).

text: See paragraph 26 of the Schedule to the draft scheme (paragraph 28 of the Schedule to the updated draft scheme). 42 See paragraph 30 of the Schedule to the draft scheme (paragraph 32 of the Schedule to the updated draft scheme). 43 See paragraph 34 of the Schedule to the scheme. A similar power may be exercised by the Regulatory Authority. 44 See paragraph 35 of the Schedule to the scheme. Acting in this capacity, the Minister may increase the charge payable by the institution, impose additional conditions or revoke the institution’s guarantee. 45 See paragraph 36 of the Schedule to the draft scheme (paragraph 38 of the Schedule to the updated draft scheme). 46 See paragraph 41 of the Schedule to the draft scheme (paragraph 42 of the Schedule to the updated draft scheme). The rules concerning payment of dividends should take into account the objective of achieving or maintaining required capital ratios. 47 See paragraphs 46-49 of the Schedule to the scheme. 48 See paragraph 53 of the Schedule to the draft scheme (paragraph 53.4 of the Schedule to the updated draft scheme), which also provides that any restructuring plan drawn up for a covered institution in such a case should be notified to the European Commission and should comply with EU State aid and competition law. 49 See paragraph 4 of the Schedule to the scheme. 50 See paragraph 37 of the Schedule to the scheme. The Governor may in particular require a covered institution to: (i) appropriately manage its balance sheet in a manner consistent with the purposes of the Act and the need to avoid significant distortion of financial flows; (i) put in place improved structures to ensure long-term stability of funding; (iii) take steps to restructure its executive management responsibilities and strengthen its management capacity and corporate governance; (iv) improve liquidity, solvency and capital ratios in circumstances where this is required; and (v) take measures to minimise any risk of recourse to the guarantee. 51 See paragraph 3 of the Schedule to the updated draft scheme.

text: See paragraph 51 of the Schedule to the scheme. 53 See consultation powers given to the Governor under paragraphs 13, 26, 36, 39 and 41 of the Schedule to the draft scheme (the Schedule to the updated draft scheme provides for such consultation powers in four cases, referred to in paragraphs 13, 28, 38 and 42). 54 See paragraph 52 of the Schedule to the scheme. 55 See paragraph 22 of the Schedule to the draft scheme (paragraph 24 of the Schedule to the updated draft scheme). The parameters in question include, inter alia, liquidity requirements, capital ratios, asset quality, risk exposures and funding costs. 56 See paragraph 23 of the Schedule to the draft scheme (paragraph 25 of the Schedule to the updated draft scheme). 57 See paragraph 40 of the Schedule to the updated draft scheme. 58 See paragraphs 25 and 27 of the Schedule to the draft scheme (paragraphs 27 and 29 of the Schedule to the updated draft scheme). 59 See paragraphs 29 of the Schedule to the draft scheme (paragraph 31 of the Schedule to the updated draft scheme). 60 See paragraph 33 of the Schedule to the scheme. 61 See paragraphs 38, 40, 43 and 44 of the Schedule to the draft scheme (paragraphs 36, 39, 41 and 44 of the Schedule to the updated draft scheme). The elements of commercial conduct to be regulated by the Regulatory Authority under these provisions include: (i) targets on loan/deposit ratios, wholesale funding/total liabilities, deposit growth and maximum loans-to-value on new loans; (ii) limitations on exposures to any sector, customer or connected customers; (iii) liquidity, solvency and capital ratios; (iv) restrictions in relation to market share and balance sheet growth introduced to minimise any potential competitive distortion that may otherwise arise; (v) directions for the covered institution to cease passing on the costs of the guarantee to its customers in an unwarranted manner.

text: See paragraph 28 of the Schedule to the draft scheme (paragraph 30 of the Schedule to the updated draft scheme). 64 See paragraph 52 of the Schedule to the scheme. 65 See paragraph 3.2 (i)-(ii) of ECB Opinion

text: . 66 See paragraph 2, first and fourth bullet point of the Schedule to the draft scheme (paragraph 2.6 of the Schedule to the updated draft scheme). 67 See the Basel Committee on Banking Supervision, ‘Core Principles for Effective Banking Supervision’, September 1997, principle I, document available on the Bank for International Settlements website, www.bis.org. 68 See, e.g. paragraph 3.2.1 of ECB Opinion

text: of 9 March 2006 at the request of the Polish Minister of Finance on a draft law on the supervision of financial institutions. 69 Under paragraph 37.2 of the updated draft scheme ‘the Governor and the Regulatory Authority, after consultation with the Minister’ may direct the covered institution to ‘[p]ut in place improved structures to ensure long-term stability of funding’, while under paragraph 40 of the Schedule to the updated draft scheme states that ‘Unless it has already done so, a covered institution shall take steps to establish such funding structures as the Regulatory Authority, in consultation with the Minister, thinks appropriate having regard to the purposes of the Act of 2008, within such period as the Minister may direct’. 70 Under paragraph 34 of the Schedule to the updated draft scheme, this power is assigned to ‘the Minister or the Regulatory Authority or both’, whereas under paragraph 37.3 of the Schedule to the updated draft scheme the power is attributed to ‘the Governor and the Regulatory Authority, after the consultation with the Minister’.

text: For example, paragraph 42 of the updated draft scheme provides that the power to limit the payment of dividends by the covered institution is to be exercised by the Minister after consulting the Governor and the Regulatory Authority, while the similar power under paragraph 43 of the updated draft scheme to prohibit the covered institution from engaging in buy-backs or redemptions of its ordinary shares is to be exercised by the Regulatory Authority after consulting the Minister.

sprak: en

title: Opinion of the European Central Bank of 15 October 2008 at the request of the Irish Minister for Finance on a draft Credit Institutions (Financial Support) Scheme 2008 (CON/2008/48)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 15 October 2008 at the request of the Irish Minister for Finance on a draft Credit Institutions (Financial Support) Scheme 2008 (

text: ) Introduction and legal basis

text: On 10 October 2008 the European Central Bank (ECB) received a request from the Irish Minister for Finance (hereinafter the ‘Minister’) for an opinion on a draft Credit Institutions (Financial Support) Scheme 2008 (hereinafter the ‘draft scheme’) to be adopted by the Minister by means of a statutory instrument under the provisions of the Credit Institutions (Financial Support) Act 2008 (hereinafter the ‘Act’). On 13 October 2008 the ECB was informally provided by the Irish Department of Finance with an updated version of the draft scheme (hereinafter the ‘updated draft scheme’) . The scheme implements the more general rules contained in the recently adopted Act, on which the ECB has been consulted and issued its Opinion

text: on 3 October 2008 . In accordance with the Act, the Minister may not adopt the scheme until a resolution approving it has been passed by each House of the Oireachtas (National Parliament) . The Minister requested the ECB’s opinion on the scheme as a matter of urgency, prior to its submission to the Oireachtas. The ECB’s competence to deliver an opinion is based on Article 105(4) of the Treaty, in conjunction with 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 scheme relates to a national central bank, the Central Bank and Financial Services Authority of Ireland (hereinafter the ‘Central Bank’), 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 scheme

text: 1.1 The primary objective of the scheme is to provide a legal basis for the Minister to stand as guarantor of the ‘covered liabilities’ of a ‘covered institution’ for the period of two years from 30 September 2008 to 29 September 2010, as a form of financial support provided under the Act . In accordance with the Act, the scheme has been brought forward as the Minister is of the opinion that: (i) there is a serious threat to the stability of credit institutions in Ireland generally, or would be such a threat if he did not provide the financial support; (ii) the provision of the financial support is necessary, in the public interest, for maintaining the stability of the financial system in Ireland; and (iii) the provision of the financial support is necessary to remedy a serious disturbance in the economy of Ireland . 1.2 The scheme further specifies the scope of the State’s guarantee by clarifying the means by which credit institutions are covered by the scheme and the types of liabilities of the covered institutions for which the State guarantee will be provided, as further discussed in paragraph 3 of this opinion. A covered institution will be under an obligation to pay a quarterly charge to the State for a guarantee, calculated on the basis of, inter alia, its risk profile . The scheme confers extensive powers on the Minister, the Governor of the Central Bank and the Irish Financial Services Regulatory Authority (hereinafter the ‘Regulatory Authority’), as further discussed in paragraph 4 of this opinion.

text: 2. General observations

text: 2.1 The ECB notes that there is an ongoing discussion at both the international and European levels with a view to coordinating the many diverse actions of countries aimed at preserving confidence and stability in the international financial markets. In line with the common principles to guide the action of Member States agreed at the Ecofin meeting on 7 October 2008: (i) interventions should be timely and the support should in principle be temporary; (ii) the interests of taxpayers should be protected; (iii) existing shareholders should bear the due consequences of the intervention; (iv) the government should be in a position to bring about a change of management; (v) management should not retain undue benefits; (vi) governments may have, inter alia, the power to intervene with regard to remuneration; (vii) legitimate interests of competitors must be protected, in particular through the State aid rules, and negative spill-over effects should be avoided . Moreover, the ECB notes that on 12 October 2008 the Heads of State of the euro area issued a ‘Declaration on a

text: concerted European action plan of the euro area countries’ , in which they confirmed their commitment to act together in a decisive and comprehensive way in order to restore confidence and proper functioning of the financial system, aiming at restoring appropriate and efficient financing conditions for the economy. They agreed on common principles to be followed by the EU and euro area governments, central banks and supervisors to avoid national measures adversely affecting the functioning of the single market and the other Member States. Against this background, the ECB highlights that all the initiatives put in place by national governments to restore the confidence in financial markets should be aimed at implementing such common principles, in the spirit of close cooperation with other Member States and EU institutions. 2.2 The ECB underlines that the recommendations expressed in this opinion in relation to the scheme should be taken together with the recommendations expressed by the ECB in relation to the draft Act in its Opinion

text: . The ECB wishes to draw the consulting authority’s attention to the recent ECB opinions issued at the request of other Member States, whereby the ECB has commented on legislative proposals sharing some of the features of the scheme . It is the ECB’s intention to facilitate coordination of the various national efforts addressing the current financial situation, inter alia through timely adoption and publication of ECB opinions on such draft national legislation.

text: 3. Scope of the financial support provided

text: 3.1 Selection of covered credit institutions Under the scheme on which the ECB was originally consulted, the institutions covered are those credit institutions and subsidiaries which the Minister, following a recommendation from the Governor of the Central Bank, specifies by order under the Act as requiring financial support . A credit institution joins the scheme by executing a guarantee acceptance deed in the form to be specified by the Minister and, if required by the Minister, its parent or any other group company also executing such a guarantee acceptance deed . A subsidiary of any parent credit institution which is not regulated by the Regulatory Authority may qualify as a ‘covered institution’, but in the case of a covered institution which is a subsidiary of any non-Irish parent credit institution, the only liabilities covered would be those which relate to the subsidiary’s own business . 3.2 In the context of the above provisions, the ECB notes that on 30 September 2008 the Irish Government announced that it had decided to put in place a two-year guarantee arrangement to

text: safeguard liabilities with six explicitly named Irish credit institutions and such specific subsidiaries as may be approved by the Government following consultation with the Central Bank and the Regulatory Authority . The ECB notes that on 9 October 2008 the Minister announced that the two-year scheme would also be available to five explicitly named ‘banking subsidiaries’ in Ireland ‘with a significant and broad-based footprint in the domestic economy’ . Against this background, the ECB has the following comments. 3.3 First, the ECB notes that the original proposal whereby the Governor of the Central Bank would be entrusted with the authority to ‘make recommendations’ to the Minister as regards the credit institutions to be covered by the scheme has been modified by the updated draft scheme to the effect that the Minister would instead take a decision to designate those systemically important credit institutions which the Minister specifies require financial support. Given that the purpose of the scheme is to maintain the stability of the Irish financial system, the original proposal to confer this particular role on the Governor would have complemented the Governor’s financial stability 17 18 role under the Act and, more generally, the Central Bank’s statutes . The Governor’s financial stability role at domestic level also facilitates the discharge of his responsibilities as a member of the ECB’s Governing Council to contribute to the stability of the wider European and global financial systems under Article 105(5) of the Treaty. The ECB would have a preference to revert to the original proposal and in any case ensure a proper involvement of the Governor when taking any decision under the scheme with a bearing on financial stability, including all decisions by the Minister to revoke the guarantee in whole or in part in relation to a credit institution. 3.4 Second, the ECB reiterates the stance taken in its previous opinion, according to which arrangements which may be seen as providing preferential treatment to specified credit institutions should be avoided . In this respect, the ECB appreciates the provision of the scheme stating that it is introduced by the Minister having regard to the objective of ensuring compliance with the requirements of EU State aid and competition law , as well as the statements made in the explanatory memorandum to the effect that the scheme is designed to ensure that the covered institutions will not be unfairly advantaged by making undue use of their guaranteed status to engage in a heightened level of activities which create market distortions and facilitate abnormal

text: balance sheet growth . In this regard, the ECB underlines the importance of establishing appropriate safeguards such as for example limits to marketing of financial products or limits to expansion of activities on the basis of the state guarantees . 3.5 The ECB understands that the Commission has confirmed the compatibility of the guarantee arrangement proposed by the Irish Government with Community State aid rules . The ECB reiterates the importance of ensuring that the further regulatory practice under the proposed arrangements will be conducted in full compliance with the relevant Community law provisions, in particular as regards competition and State aid rules, as well as EU financial services legislation and the single market principles . 3.6 Types of liabilities covered by the guarantee Under the scheme ‘covered liabilities’ are defined as those liabilities of covered institutions existing on 30 September 2008 or at any time thereafter up to and including 29 September 2010 in respect of: (i) all retail and corporate deposits (to the extent not covered by existing deposit protection schemes in Ireland or any other jurisdiction); (ii) interbank deposits; (iii) senior unsecured debt; (iv) covered bonds; and (v) dated subordinated debt (Lower Tier 2) . In the case of a covered institution which is a subsidiary of any non-Irish parent credit institution, the only covered liabilities would be those which relate to the subsidiary’s own business and in respect of which there is no recourse to any other entity (and would not include liabilities which, in the absence of the guarantee, would normally be those of other members of the covered institution’s group) . 3.7 As a further comment as regards the scope of coverage of the State guarantee, the ECB notes that, in line with the declaration made by the euro area Heads of State mentioned before, Member States have to act in coordinated manner to avoid that significant differences in national implementation could have a counter-productive effect, creating distortions in global banking markets. The euro area Heads of State also acknowledged the need to work in cooperation with the ECB so as to ensure consistency with the management of liquidity by the Eurosystem and compatibility with the operational framework of the Eurosystem. Against this background, the ECB notes that uncoordinated decisions to guarantee interbank deposits in some Member States should be avoided as they may involve a fragmentation of the euro area money market. The extension of the guarantee

text: to cover interbank deposits, as is the case under the scheme , could entail a substantial distortion in the various national segments of the euro area money market by potentially increasing short-term debt issuance activity across Member States and therefore impairing the implementation of the single monetary policy, which is a competence of the Eurosystem under Article 105(2) of the Treaty. The ECB also notes that the summit declaration states that the euro area Governments would make available a Government guarantee of new medium term (up to 5 years) bank senior debt issuance, whereas the scheme proposes to cover senior unsecured debt and asset covered securities, without limitation as to maturity, and dated subordinated debt (Lower Tier 2) . 3.8 The draft scheme on which the ECB was formally consulted indicates that it remains to be clarified whether the covered liabilities would exclude any inter-group lending and any debt due to the ECB . The exclusion of debts due to the ECB from the liabilities covered by the guarantee under the scheme would be incongruous, however. Under the Act the borrowings, liabilities and obligations of any credit institution or subsidiary in respect of which the Minister may provide financial support include borrowings, liabilities and obligations to the Central Bank . This would imply that the following liabilities to the Central Bank would be covered liabilities under the scheme: (i) deposits made by the Central Bank with covered Irish credit institutions as part of the Central Bank’s investment operations; and (ii) senior unsecured debt securities and covered bonds issued by Irish credit institutions covered by the scheme and held by the Central Bank as collateral in the Central Bank’s Eurosystem monetary policy and intra-day credit operations . By contrast, deposits made by the ECB with these same Irish credit institutions as part of the ECB’s investment operations would not be covered liabilities under the scheme. As a practical matter, this would, in all probability, provide a strong incentive to the ECB to refrain from making deposits with such Irish credit institutions in the future, since the ECB could no longer rely on the normal credit ratings attributed to exposures with these Irish banks, which would be based on the presence of the Minister’s guarantee . 3.9 The ECB further understands that because of the abovementioned inclusion of covered institutions’ liabilities towards the Central Bank within the scope of the State guarantees provided under the scheme , the Central Bank may find itself in a situation where it is lending to a credit institution against collateral which may, at least partially, take the form of a guarantee provided by the State.

text: Such central bank lending to a solvent credit institution on the basis of a State guarantee is, in principle, possible, provided that the Central Bank’s compliance with the monetary financing prohibition under Article 101 of the Treaty is ensured. Specific criteria for such compliance must be respected as noted by the ECB in a recent opinion issued with respect to another EU jurisdiction which has legislated in response to the current market turmoil . In this opinion, the ECB underlines its earlier recommendation that nothing in the legal framework governing the provision of financial support by the Irish authorities should prejudice the Central Bank’s compliance with the prohibition on monetary financing under Article 101 of the Treaty . 3.10 Finally, as regards the payment of the claims in respect of covered liabilities, the ECB highlights that in general the existing funding mechanism of the deposit-guarantee scheme should be used to the extent possible. In this respect, in fact, the ECB notes that the scheme covers all retail and corporate deposits to the extent they are not covered by existing protection schemes in the State or any other jurisdiction . However, the ECB notes that the relationship between the scheme and the existing deposit guarantee scheme as regards the treatment of claims and the reimbursement of deposits should be further clarified.

text: 4. Allocation of supervisory powers related to provision of financial support

text: 4.1 The scheme confers extensive powers on the Minister, the Governor of the Central Bank and the Regulatory Authority, which are divided as follows. (i) The Minister has the power to: (i) impose specific obligations on covered institutions which are subsidiaries of non-Irish parent credit institutions to ensure that the scheme is not used for the benefit of any entity other than the relevant covered institution ; (ii) in consultation with the relevant overseas regulator (subject to the requirements of the Treaty and the ESCB Statute), require certain obligations of the scheme to apply to the parent of a covered institution or any member of its group ; (iii) receive confirmations from covered institutions regarding compliance with relevant regulatory standards and (through covered institutions’ auditors) with the conditions of the scheme ; (iv) direct, following consultation with the

text: Governor and the Regulatory Authority, a covered institution to submit a restructuring plan to ensure compliance with the objectives of the scheme ; (v) direct a covered institution to appoint non-executive directors to its board from a panel approved by the Minister and admit observers appointed by the Minister to observe the meetings of the internal committees of the covered institution ; (vi) direct a covered institution to take specified steps to restructure its executive management responsibilities, strengthen its management capacity and improve its corporate governance ; (vii) impose sanctions on the covered institution, if in the opinion of the Minister it is in material breach of its obligations under the scheme ; (viii) following consultation with the Governor and the Regulatory Authority, prevent a covered institution from acquiring shares in any other credit or financial institution, establishing any subsidiaries or entering into or acquiring any new business where this would increase the State’s liability under the guarantee ; (ix) following consultation with the Governor and the Regulatory Authority, make rules governing the payment of dividends by a particular covered institution ; (x) establish an independent oversight committee to impose controls on the executive remuneration of covered institutions ; and (xi) in the event of any default of a covered institution which creates a liability on the State, direct the covered institution concerning its business and corporate structures . (ii) The Governor of the Central Bank has powers to: (i) together with the Regulatory Authority, set regulatory requirements for the covered institutions ; (ii) together with the Regulatory Authority and following the consultation with the Minister, require a covered institution to conduct its affairs in a manner that progressively reduces the risk to the State under its Guarantee . Further, the Governor may be consulted by the Minister regarding institutions to be covered under the scheme . The Governor is also consulted by the Minister before the Minister exercises any functions under the scheme which relate to the Governor’s statutory

text: responsibilities , as well as with respect to the exercise of certain more specific powers of the Minister under the scheme . The Governor monitors, together with the Regulatory Authority’s Chief Executive, the operation of the scheme and reports regularly to the Minister thereon . (iii) The Regulatory Authority, apart from the abovementioned functions performed jointly with the Governor: (i) receives (on behalf of the Minister) from the covered institutions reports, addressing their key supervisory parameters and submits to the Minister reports on the compliance by covered institutions with the terms and conditions of the scheme ; (ii) after consultation with the Minister, may require a covered institution to establish appropriate funding structures ; (iii) if so directed by the Minister, may require any report or other information to be provided by a covered institution to be audited by an independent auditor ; (iv) is consulted by the covered institutions towards developing a code of practice for effective risk management, in furtherance of the purposes of the Act ; (v) may, following consultation with the Minister, require changes in the composition of a covered institution’s board in order to achieve an appropriate balance between executive and non-executive directors ; and (vi) may, after consultation with the Minister, require changes in the specific elements of the commercial conduct of the covered institution . 4.2 On the one hand, the ECB welcomes those provisions of the draft scheme that allow the Governor to be involved in the exercise of the Minister’s powers under the Act and the scheme for purposes of maintaining the stability of the Irish financial system. Moreover, the ECB welcomes the express safeguards introduced under the draft scheme as regards the role of the Governor, in particular the clarifications that: (i) nothing in the scheme shall prejudice the independence of the Governor ; (ii) the Governor’s authority to disclose information concerning a covered institution or its subsidiaries to the Minister and the Regulatory Authority is subject to the confidentiality

text: requirements imposed on the Governor by the Treaty and the ESCB Statute ; and (iii) the Governor’s monitoring and regular reporting to the Minister regarding the operation of the scheme is without prejudice to the Governor’s responsibility for the performance of functions conferred on the Governor and the Central Bank under the Treaty and the ESCB Statute . These provisions satisfactorily incorporate, as far as the draft scheme is concerned, the recommendations made in this respect in the recent ECB opinion on the Act . 4.3 On the other hand, the ECB notes that the division of responsibilities to be performed in the implementation of the scheme by the Minister, the Governor and the Regulatory Authority provides the Minister with substantive powers to review, direct or otherwise influence the conduct of the credit institutions concerned. The ECB appreciates that the Minister must protect the financial interests of the Irish taxpayer . However, the ECB would also wish to draw attention in this context to the principle of operational independence of banking supervisors, which are to pursue supervisory objectives free from political pressure, which is an internationally recognised supervisory standard specified in the Basel Core Principles for Effective Banking Supervision . In line with its previous opinions , the ECB recommends that the allocation of powers related to the operation of the scheme be reconsidered, with a view to assigning to the Regulatory Authority and/or the Governor those powers under the scheme that are closely connected with the performance of supervisory tasks. 4.4 As a general remark, the ECB notes that the powers conferred under the scheme could be defined in a more coherent way. For example, in the updated draft scheme there appears to be an overlap between the two separate references to the functions of requiring the covered institution to ‘put in place improved structures to ensure long-term stability of funding’ or to ‘restructure its executive management responsibilities, strengthen its management capacity and improve its corporate governance’ . Also, a greater consistency in the method of allocating the various powers under the

text: draft scheme could be ensured . The ECB recommends that a more coherent delineation of the powers of the respective supervisory authorities is introduced.

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

text: Done at Frankfurt am Main, 15 October 2008.

text: [signed]

text: The Vice-President of the ECB

text: Lucas D. PAPADEMOS


text: OJ L 189, 3.7.1998, p. 42. 2 Bundesgesetzblatt I, p. 809, 813, 8.5.2008. 3 ECB Opinion

text: of 9 January 2008 at the request of the German Ministry of Finance on a draft law consolidating federal law within the field of competence of the Ministry of Finance and amending the Law on coins. 4 OJ L 184, 15.7.2005, p. 60.

text: Section 2(1) of the Law on coins provides: ‘The Federal Government may issue, as collector coins…commemorative coins denominated in euro.’ According to Section 2(2) ‘the German euro commemorative coins shall be domestic legal tender in accordance with this Law’. 6 At EU level, the terms ‘commemorative coins’ and ‘collector coins’ are defined in Commission Recommendation of 29 September 2003 on a common practice for changes to the design of national obverse sides of euro circulation coins (OJ L 264, 15.10.2003, p. 38) and the Communication from the Commission on the recommendation of 29 September 2003 concerning a common practice for changes to the design of national obverse sides of euro circulation coins (OJ C 247, 15.10.2003, p. 5). According to these instruments, commemorative coins are part of euro circulation coins. However, their national side differs in that it is usually destined to commemorate an event or a personality, and the two euro coin should be the sole denomination used for such issues. Collector coins must have a different face value and their legal tender status is restricted to the issuing Member State. 7 ECB Annual Report 2002, p. 134. Available on the ECB’s website at www.ecb.europa.eu.

title: Opinion of the European Central Bank of 16 October 2008 at the request of the German Ministry of Finance on a draft order on the replacement of euro coins and German euro commemorative coins which are unfit for circulation and the charging of appropriate fees (CON/2008/49)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 16 October 2008 at the request of the German Ministry of Finance on a draft order on the replacement of euro coins and German euro commemorative coins which are unfit for circulation and the charging of appropriate fees (

text: ) Introduction and legal basis

text: On 25 August 2008 the European Central Bank (ECB) received a request from the German Ministry of Finance for an opinion on a draft order on the replacement of euro coins and German euro commemorative coins which are unfit for circulation and the charging of appropriate fees (hereinafter the ‘draft order’). The ECB’s competence to deliver an opinion is based on Article 105(4) of the Treaty establishing the European Community and the second indent of

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

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

text: 1. Purpose of the draft order

text: The draft order is based on § 9a of the Law on coins which was subject to a separate ECB opinion earlier this year . This provision forms the legal basis for charging a fee as well as for setting up requirements for the sorting, packaging and labelling of packaging in the framework of the replacement and the receipt of unfit euro coins and German euro commemorative coins by the Deutsche Bundesbank. The draft order is intended to implement

text: Commission Recommendation 2005/504/EC of 27 May 2005

text: concerning authentication of euro coins and handling of euro coins unfit for circulation , whose purpose is to create equal conditions for the replacement of coins unfit for circulations in the euro area.

text: 2. General observations

text: 2.1 The draft order provides for a general fee to be charged for replacing unfit euro coins and German commemorative euro coins. In this context, the ECB notes that the use of the term ‘commemorative coin’ (‘Gedenkmünze’) in the draft order follows the definition of the term contained in the German Law on coins , according to which commemorative coins are covered by the term ‘collector coin’, which is different from established EU practice in this regard . Under § 5 amounts of coins falling below specified levels and unfit coins resulting from the manufacture of coin rolls in foil packaging are exempted from a fee. No fee or a reduced fee may be charged ‘for reasons of fairness or in the public interest’. 2.2 As coins have a long life-span of more than 25 years, the replacement of coins unfit for circulation can be considered a rather minor activity in the range of cash services provided by euro area national central banks (NCBs). Accordingly the ECB underlines that the principle of basic free-ofcharge cash services as part of the public tasks to be provided by euro area NCBs is agreed Eurosystem practice and remains unaffected by the draft order. According to the Eurosystem fee policy and common approach to opening hours and debiting/crediting rules for cash services at NCB counters implemented from 1 March 2002, the different levels of services are: • free-of-charge: these are the basic services provided by all NCBs, taking into account their unique role in providing the economy with cash; and • fee-based: these are additional services that NCBs may provide. A fee must be paid for these optional services, taking into account the fact that they may also be provided by commercial third parties. It should be ensured that the main principle of basic free-of-charge cash services in the Eurosystem is not called into question by the draft order.

text: This opinion will be published on the ECB’s website. Done at Frankfurt am Main, 16 October 2008. [signed]

text: The President of the ECB

text: Jean-Claude TRICHET


title: Opinion of the European Central Bank of 17 October 2008 at the request of the Belgian Ministry of Finance on a draft royal decree adopted under Article 117bis of the Law of 2 August 2002 on the supervision of the financial sector and on financial services (CON/2008/50)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 17 October 2008 at the request of the Belgian Ministry of Finance on a draft royal decree adopted under Article 117bis of the Law of 2 August 2002 on the supervision of the financial sector and on financial services (

text: ) Introduction and legal basis

text: On 14 October 2008 the European Central Bank (ECB) received a request from the Nationale Bank van België/Banque Nationale de Belgique (NBB), acting on behalf of the Belgian Ministry of Finance, for an opinion on a draft royal decree adopted under Article 117bis of the Law of 2 August 2002 on the supervision of the financial sector and on financial services (hereinafter the ‘draft royal decree’). Considering that the draft royal decree is indispensable to preserving the stability of the Belgian financial system and that any delay in its adoption or publication would be detrimental to its effectiveness and its objective of strengthening the market’s confidence in the measures announced, the consulting authority has requested the ECB to provide its opinion as a matter of extreme urgency. The ECB’s competence to deliver an opinion is based on Article 105(4) of the Treaty establishing the European Community and on the sixth indent of

text: on the consultation of the European Central Bank by national authorities regarding draft legislative provisions , as the draft royal decree 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 royal decree

text: 1.1 The draft royal decree is motivated by the current financial market crisis and by the Belgian authorities’ wish to preserve the stability of the Belgian financial system . The legal basis for the draft royal decree is to be found in

text: Article 117

text: bis of the Law of 2 August 2002 on the supervision of the financial sector and on financial services .

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

text: 2 See the first recital of the draft royal decree.

text: 3 See also paragraph 2.1. 1.2 The draft royal decree would empower the Belgian Minister of Finance to grant a State guarantee to cover liabilities entered into by credit institutions and/or financial holding companies (financiële holding/compagnies financières) (hereinafter the ‘beneficiaries’) incorporated under Belgian law vis-à-vis other credit institutions (and/or professional counterparts belonging to the categories identified by the Minister of Finance ) between 9 October 2008 and 31 October 2009, provided that such liabilities mature at the latest on 31 October 2011 . The decision to grant a State guarantee would be subject to the conditions that: (i) the beneficiary takes measures aimed at supporting its financial situation, its solvency and its liquidity (or commits itself to taking such measures); and (ii) the granting of the guarantee is justified in the interests of the Belgian economy and by the protection of all depositors . The Minister of Finance would be empowered to lay down further modalities and conditions for a State guarantee, including setting its ceiling, specifying the remuneration to be paid for the granting of the guarantee, and any other modality aimed at ensuring compliance with the two abovementioned conditions . Moreover, beneficiaries would only be entitled to invoke a State guarantee granted to them if they prove: (i) that it is not possible for them to meet the liabilities covered by the State guarantee at their maturity; and (ii) that the enforcement of the State guarantee is necessary to ensure their continuity . The Minister of Finance would be entitled to terminate a State guarantee at any time, without prior notice or compensation, if the conditions for granting the guarantee were no longer 10 11 met . The draft royal decree would enter into force retroactively, on 9 October 2008 .

text: 2. General observations

text: 2.1 As mentioned above, the legal basis for the draft royal decree is to be found in

text: Article 117

text: bis of the Law of 2 August 2002 on the supervision of the financial sector and on financial services. The ECB was recently consulted on an early version of

text: Article 117

text: bis and stressed in its Opinion

text: that this broad provision needed ‘to be further clarified with a view to enhancing legal certainty and to ensuring its compatibility with Community law’ . The final version of

text: Article 117

text: bis, as the ECB understands has been adopted by the Belgian Parliament on 15 October 2008, provides that the King may, after consulting the Financial Stability Committee , in the event of a sudden crisis on the financial markets or a serious threat of systemic crisis, and in order to limit the

text: 4 See Article 1 of the draft royal decree.

text: 5 It is noted that the term ‘professional counterparts’ is not defined in the draft royal decree.

text: 6 See Article 2 of the draft royal decree.

text: 7 See Article 3 of the draft royal decree.

text: 8 See

text: Article 4

text: , first paragraph, of the draft royal decree.

text: 9 See

text: Article 4

text: , second paragraph, of the draft royal decree.

text: 10 See

text: Article 4

text: , third paragraph, of the draft royal decree.

text: 11 See Article 5 of the draft royal decree.

text: 12 Opinion

text: of 8 October 2008 at the request of the Belgian Ministry of Finance on a preliminary draft law on measures promoting financial stability and in particular establishing a State guarantee for the provision of credit in the context of financial stability, see in particular paragraph 5. All ECB opinions are available on the ECB website at www.ecb.europa.eu/ecb/legal/opinions/html/index.en.html

text: 13 The Financial Stability Committee comprises the members of the Management Committee of the Commissie voor het Bank-, Financie- en Assurantiewezen/Commission Bancaire, Financière et des Assurances and of the Board of Directors of the NBB, and is chaired by the Governor of the NBB (Article 117(3) of the Law of 2 August 2002). scale or effects thereof: (i) adopt regulations which may complement or derogate from certain supervisory laws in the financial sector ; and (ii) establish, by decree deliberated within the Council of Ministers, a system to grant a State guarantee for liabilities entered into by the supervised institutions as further identified by such a decree . The ECB welcomes the amendment made to

text: Article 117

text: bis since it clarifies the scope of the powers given to the King with regard to complementary or derogatory measures in the case of financial crisis. In this respect, the ECB notes that the reference to the possibility for the King to take ‘any measure’ to preserve the stability of the financial system has been deleted. Without prejudice to the comments made below on the substance of the draft royal decree, the ECB welcomes the introduction of an explicit legal basis in the law for the granting of a State guarantee. 2.2 The ECB notes that there is an ongoing discussion at both the international and European levels with a view to coordinating the many diverse actions of countries aimed at preserving confidence and stability in the international financial markets. The following common principles to guide the actions of Member States were agreed at the Ecofin meeting on 7 October 2008: (i) interventions should be timely and the support should in principle be temporary; (ii) the interests of taxpayers should be protected; (iii) existing shareholders should bear the due consequences of the intervention; (iv) the government should be in a position to bring about a change of management; (v) management should not retain undue benefits; (vi) governments may have, inter alia, the power to intervene with regard to remuneration; (vii) legitimate interest of competitors must be protected, in particular through the State aid rules; and (viii) negative spill-over effects should be avoided . Moreover, the ECB notes that on 12 October 2008 the Heads of State of the euro area issued a ‘Declaration on a concerted European action plan of the euro area countries’ , in which they confirmed their commitment to act together in a decisive and comprehensive manner to restore confidence in and proper functioning of the financial system, with the aim of restoring appropriate and efficient financing conditions for the economy. They agreed on common principles to be followed by governments, central banks and supervisors in the euro area and the EU to avoid national measures which could adversely affect the functioning of the single market and the other Member States. This coordinated approach includes initiatives aimed at: ensuring appropriate liquidity; facilitating the funding of banks through various means; providing additional capital resources to financial institutions; and recapitalisation of distressed banks. Against this background, the ECB highlights that all of the initiatives put in place by national governments to restore confidence in financial markets should be aimed at implementing such common principles, in the spirit of close cooperation with other Member States and EU institutions.

text: 14 New

text: Article 117

text: bis (1) of the Law of 2 August 2002.

text: 15 New

text: Article 117

text: bis (2) of the Law of 2 August 2002. 16 See the press release of the 2894th Council meeting (13784/08), available on the Council website at www.consilium.europa.eu. 17 See the declaration of 12 October 2008, available on the French Presidency’s website at www.ue2008.fr. 2.3 On a general note, the ECB would like to underline that the draft royal decree defines in very broad terms: (i) the possible beneficiaries of a State guarantee ; (ii) the type of liabilities that can be covered ; as well as (iii) the modalities and conditions which can be imposed on the beneficiaries by the Minister of Finance . The draft royal decree therefore leaves a wide margin of discretion to the Minister of Finance in his decision whether to grant a State guarantee and in specifying further the modalities and conditions for granting the guarantee. In this respect, the ECB recommends that the draft royal decree (in its recitals) or the report to the King relating to it should refer to the abovementioned Declaration and specify that the draft royal decree, as well as any implementing measure and/or decision, are adopted in the context and should be read in the light of the said Declaration. 2.4 The ECB underlines that the recommendations made in this opinion in relation to the draft royal decree should be read together with the recommendations previously made by the ECB in its Opinion

text: . In this respect, the ECB recalls more specifically the importance it attaches to coordinated responses from national authorities and to the compliance of the draft royal decree, as well as any implementing measure and/or decision, with Community law, including State aid rules . The ECB also wishes to draw the consulting authority’s attention to the recent ECB opinions issued at the request of other Member States, in which the ECB has commented on legislative proposals sharing some of the features of the draft royal decree . It is the ECB’s intention to facilitate coordination of the various national efforts addressing the current financial situation, inter alia through timely adoption and publication of ECB opinions on such national legislative proposals.

text: 3. Specific comments

text: 3.1 Selection of the beneficiary institutions The ECB reiterates the stance taken in its Opinion

text: , according to which arrangements which may be seen as providing preferential treatment to specified credit institutions should be avoided . In the present case, the Minister of Finance may decide to guarantee the liabilities of any credit institution or financial holding company incorporated under Belgian law provided that it complies with the conditions outlined in the draft royal decree . The ECB would recommend clarifying in the draft royal decree or in the report to the King that the State guarantee will be

text: 18 I.e. credit institutions and/or financial holding companies incorporated under Belgian law which have taken, or have committed themselves to taking, all measures which are useful in order to support their financial situation, their solvability and their liquidity (see Articles 2 and 3 of the draft royal decree). 19 I.e. liabilities entered into vis-à-vis other credit institutions and/or professional counterparts belonging to the categories identified by the Minister of Finance, provided that they have been entered into between 9 October 2008 and 31 October 2009 and mature at the latest on 31 October 2011; see Article 2 of the draft royal decree. 20 On these modalities, see paragraph 1.2, concerning Article 4 of the draft royal decree. 21 Opinion

text: . 22 Opinion

text: , in particular paragraphs 2 and 5. 23 See Opinion

text: of 15 October 2008 at the request of the Irish Minister for Finance on a draft Credit Institutions (Financial Support) Scheme 2008. 24 See Opinion

text: , paragraph 2.3. 25 For these conditions, see paragraph 1.2. granted to these entities in accordance with the requirements of EC competition law and State aid rules. In this context, it should be ensured that the beneficiary institution(s) will not be unfairly advantaged by making undue use of their guaranteed status . 3.2 Types of liabilities covered by the guarantee The ECB understands that the draft royal decree does not define what is encompassed by ‘liabilities’ (verbintenissen/engagements) eligible to be covered by a State guarantee. In this respect, the Belgian authorities publicly announced before the present consultation that such liabilities would encompass all of the financing raised by a beneficiary institution in order to obtain refinancing from credit institutions and institutional counterparties and would cover instruments such as bonds and debt securities issued by the beneficiary to institutional investors, as well as interbank deposits, fiduciary deposits, deposits of central banks, deposits of institutions, commercial paper, certificates of deposits and medium-term notes, provided that they were contracted or renewed by the beneficiary institution between 9 October 2008 and 31 October 2009 and that they mature before 31 October 2011 . The ECB also notes that, in line with the abovementioned Declaration, Member States have to act in coordinated manner to avoid significant differences in national implementation which could have a counter-productive effect, creating distortions in global banking markets. The euro area Heads of State also acknowledged the need to work in cooperation with the ECB so as to ensure consistency with the management of liquidity by the Eurosystem and compatibility with the operational framework of the Eurosystem. Against this background, the ECB notes that uncoordinated decisions among Member States should be avoided as they may involve a fragmentation of the euro area money market. In this context, the ECB would make a number of observations. First, it is the ECB’s view that the extension of the State guarantee to cover interbank deposits should be avoided. This could entail a substantial distortion in the various national segments of the euro area money market by potentially increasing short-term debt issuance activity across Member States and therefore impairing the implementation of the single monetary policy, which is an exclusive competence of the Eurosystem under Article 105(2) of the Treaty . Second, it appears crucial to ensure the harmonisation of the price determination of such a guarantee within the euro area and the EU where a level playing field is of essence. The ECB should be involved in such concertation and coordination, and would welcome this being explicitly foreseen in any subsequent legislation. 3.3 Involvement of supervisory authorities The ECB notes that the Minister of Finance’s decision to grant the State guarantee is, inter alia, subject to the condition that the beneficiary has taken (or has committed itself to taking) all measures which are useful in order to support its financial situation, its solvency and its liquidity .

text: 26 See for example Opinion

text: , paragraph 3.4. 27 See the press release of 10 October 2008 issued by the Secretariat of the Belgian Deputy Prime Minister and Minister of Finance. 28 See also Opinion

text: , in particular paragraph 3.7. In this respect, the ECB notes that proper coordination with the supervisory authority will have to be ensured. 3.4 Relationship with the preservation of the stability of the financial system As mentioned above, the draft royal decree is in particular motivated by the Belgian authorities’ wish to preserve the stability of the Belgian financial system . However, under the draft royal decree, the Minister of Finance’s decision to grant a State guarantee is subject to the condition that the granting of the guarantee is justified ‘in the interest of the Belgian economy and by the protection of all depositors’ . In addition, the ECB notes that, in its final version,

text: Article 117

text: bis of the Law of 2 August 2002 empowers the King to establish the State guarantee ‘in the event of a sudden crisis on the financial markets or of a serious threat of systemic crisis, and in order to limit the scale or effects thereof’. Therefore, the ECB recommends that this apparent discrepancy is clarified in the draft royal decree. This opinion will be published on the ECB’s website. Done at Frankfurt am Main, 17 October 2008. [signed] The President of the ECB Jean-Claude TRICHET

text: 30 See paragraph 1.1 and the reference to the first recital of the draft royal decree.