text: Council Decision 98/415/EC of 29 June 1998

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

text: Directive

text: of the European Parliament and the Council of 15 May 2014 establishing a framework for the recovery and resolution of credit institutions and investment firms and amending

text: Council Directive 82/891/EEC

text: , and Directives

text: and

text: , and Regulations

text: (EU) No 1093/2010

text: and

text: (EU) No 648/2012

text: , of the European Parliament and of the Council (OJ L 173, 12.6.2014, p. 190). 3 Directive

text: of the European Parliament and of the Council of 16 April 2014 on deposit guarantee schemes (OJ L 173, 12.6.2014, p. 149). 4 Consolidated text Dz.U. of 2014, item 1866.

text: See the ECB’s June 2014 Convergence Report, p. 30.

text: See paragraph 3.4 of ECB Opinion

text: , paragraph 4 of ECB Opinion

text: , paragraph 4.3 of ECB Opinion

text: , paragraph 3.6 of ECB Opinion

text: and paragraph 3.2 of ECB Opinion

text: . All ECB Opinions are available on the ECB’s website at www.ecb.europa.eu. See the ECB’s June 2014 Convergence Report, p. 28. 8 See paragraph 3.1 of ECB Opinion

text: See ECB Opinions

text: and

text: . 10 See paragraphs 2.5 and 2.7 of ECB Opinion

text: . See also paragraph 2.1 of ECB Opinion

title: Opinion of the European Central Bank of 28 May 2015 on the legal framework for the deposit guarantee scheme and resolution in the financial markets (CON/2015/17)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 28 May 2015 on the legal framework for the deposit guarantee scheme and resolution in the financial markets (

text: ) Introduction and legal basis

text: On 10 April 2015 the European Central Bank (ECB) received a request from the Polish Ministry of Finance for an opinion on a draft law on the Bank Guarantee Fund, the deposit guarantee scheme and compulsory restructuring (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: , as the draft law relates to Narodowy Bank Polski (‘NBP’) and rules applicable to financial institutions insofar as they materially influence the stability of financial institutions and markets. For elements of the draft law, where the exclusive purpose is the implementation of Union law, the ECB’s competence to deliver an opinion is based on Article 25.1 of the Statute of the European System of Central Banks and of the European Central Bank. 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 main purpose of the draft law is to modify the legal framework of the current deposit guarantee scheme in Poland, operated by the Bank Guarantee Fund (the ‘Fund’), and develop a framework allowing for the resolution of entities subject to this scheme. To this end, the draft law implements Directive

text: of the European Parliament and of the Council through a new, separate legal act repealing the current Law on the Bank Guarantee Fund (hereinafter the ‘Law on BFG’). The draft law also repeals existing restructuring and support measures under Polish law to bring the relevant provisions in line with the new resolution framework. In this respect the draft law amends several other related legal acts, including legislation on financial instruments, insolvency, financial market supervision and recapitalisation of financial institutions.

text: 1.2 Under the draft law, the Fund, which is a legal person, is designated as the national resolution authority and administrator of the deposit guarantee scheme, and Komisja Nadzoru Finansowego (KNF, The Financial Supervisory Authority) retains its supervisory tasks as the national supervisory authority. The most important characteristics of the redesigned framework are the following: (a) the newly established deposit guarantee scheme and resolution framework is obligatory and covers, inter alia, domestic banks, branches of non-EU credit institutions and Polish credit unions; (b) the purpose of the Fund’s activities is to take measures aimed at stabilising the domestic financial system, in particular by ensuring the functioning of the compulsory deposit guarantee scheme and conducting compulsory restructuring proceedings; (c) as the resolution authority, the Fund is conferred with resolution powers and has access to resolution tools, in particular the sale of business tool, the bridge institution tool, the asset separation tool and the bail-in tool; (d) when performing its tasks, the Fund cooperates with other bodies and institutions concerned with the stability of the domestic financial system, as well as other competent authorities; (e) the governing bodies of the Fund are the Fund Council and the Fund Management Board. The Fund Council consists of the chairperson and seven members, including two representatives of NBP, nominated by its President. The Fund Management Board is composed of three to five members (including the President and the Vice-President) and is appointed by the Fund Council; and (f) the main sources of the Fund’s financing include mandatory ex-ante annual contributions, extraordinary ex-post contributions, income from financial assets of the Fund, funds from short-term loans granted by NBP, funds from loans granted from the State budget, and funds received as a result of borrowing and issuing bonds. 1.3 Under Article 251(7) of the draft law, the sources of the Fund’s financing include funds from the short-term loans granted by NBP in accordance with

text: Article 273

text: . According to this Article, in the event of a threat to financial stability and in order to cover any urgent needs of the Fund related to the disbursement of guaranteed funds, NBP may, at the request of the Fund Council, and subject to the provision of adequate collateral, grant short-term credit to the Fund. The ECB understands that the circumstances and conditions under which such credit will be granted are similar to those . governing short-term credit under the current Law on BFG. The ECB also understands that, if approved by NBP at its sole discretion, such temporary credit would be provided under a contract between NBP as creditor, and the Fund as debtor. The draft law does not stipulate further the material terms and conditions (e.g. pricing terms) of such credit. 1.4 The Fund is designated as a resolution authority and, as a result, the role of NBP in administrative resolution matters is mainly consultative and cooperative. This role includes: (a) consultative powers, including the requirement imposed on the Minister for Finance to consult the NBP President on certain implementing measures as well as on a decision to provide a recapitalisation guarantee in respect of a distressed financial institution or to apply any of the government financial stabilisation tools;

text: (b) an obligation to conclude separate agreements for the cooperation and the exchange of information between NBP, the Fund, KNF and the Minister for Finance, which would establish an obligation to exchange information necessary for the performance of the statutory tasks of the respective entities; and (c) involvement in resolution proceedings, where NBP: (i) is informed by KNF of any cases that have been identified of institutions that are likely to fail, and (ii) informs the Fund of any institutions it is aware of whose economic situation may have a negative impact on the continuation of critical functions, financial stability or the protection of depositors.

text: 2. General observations

text: 2.1 The ECB welcomes the draft law which strengthens the tools and procedures available to the national authorities, thereby allowing for early intervention and, if necessary, effective resolution of institutions, in line with the common framework of intervention powers and rules laid down in Directive

text: . The resolution tools and procedures will, in particular, help to resolve failing banks while preserving financial stability, and help shield the public budget from the resolution costs. 2.2 The ECB stresses, however, that it does not opine on whether the draft law effectively discharges the obligations of Poland to implement Directive

text: and Directive

text: into Polish law. Rather, the ECB focuses on those provisions that may impact on the role and tasks of NBP as a central bank and as a member of the European System of Central Banks (ESCB).

text: 3. The Fund as the resolution authority

text: 3.1 Directive

text: does not prescribe the type of authority or authorities that Member States should appoint as resolution authorities, leaving this to the discretion of Member States. In this respect, the ECB notes that the Fund is designated as the national resolution authority and administrator of the deposit guarantee scheme as well as administrator of the resolution financing arrangement. 3.2 The ECB understands that the Fund is therefore entrusted with different functions, in particular: (i) management of the deposit guarantee scheme; (ii) management of the resolution fund; and (iii) resolution functions. In this respect, the ECB observes that, under Directive

text: , adequate structural arrangements must be in place to ensure operational independence and avoid conflicts of interest between the resolution function and the other functions of the relevant authority .

text: 4. Liquidity provision from NBP to the Fund

text: 4.1 The ECB emphasises the importance of alignment of national provisions with the monetary financing prohibition under Article 123 of the Treaty. The ECB underlines that national legislation which provides for the financing by a national central bank (NCB) within the ESCB of a national

text: deposit guarantee scheme for credit institutions will only be compatible with the monetary financing prohibition if such financing is short-term, addresses urgent situations, systemic stability issues are at stake and decisions are made at the NCB’s discretion . To this end, inserting references to Article 123 of the Treaty in national legislation should be considered. When exercising its discretion to grant a loan, the NCB must ensure that it is not in effect taking over a government task. In particular, central bank support for deposit guarantee schemes should not amount to a systematic ‘pre-funding’ operation. 4.2 The ECB notes that short-term credit granted by NBP to the Fund under Article 273 of the draft law is not explicitly excluded from being used to replenish the resolution fund, even though

text: Article 273

text: provides that NBP may only grant such short-term credit in order to cover urgent needs of the Fund related to the disbursement of guaranteed funds. The provision of such financing to the resolution fund would constitute a government task, and any such loan or financing by NBP would therefore breach the monetary financing prohibition under the Treaty. For the sake of legal certainty, the ECB therefore recommends that an explicit provision be inserted into the draft law specifying that the short-term credit granted under

text: Article 273

text: may not be used to supplement the bank resolution fund, the credit unions’ resolution fund or for any other resolution purposes. Directive

text: provides that resolution costs should in principle be borne by shareholders and creditors and, where these funds are not sufficient, by financing arrangements. In line with the monetary financing prohibition, NCBs may not fund these financing arrangements and replenish the resolution fund by providing credit to it.

text: 5. Cooperation and exchange of information between the Fund and other relevant authorities, including NBP

text: 5.1 The ECB notes that the draft law provides for cooperation between the Fund (as the resolution authority and the deposit guarantee scheme administrator) and other relevant authorities, including NBP, in performing their respective tasks, each keeping in mind the impact of their performance on the other. In particular, this is reflected in Section V of the draft law referring to the information requirements, data exchange and protection. 5.2 The ECB welcomes these provisions as they will enable the relevant entities to perform their statutory tasks in a coordinated fashion. In particular, they facilitate the performance by NBP of its financial stability mandate. Such arrangements are also in line with current ECB doctrine and requirements under Directive

text: , pursuant to which Member States must ensure that, where the central bank is not itself the resolution authority, the competent authority (i.e. the authority responsible for the prudential supervision of institutions) and the resolution authority engage in an adequate exchange of information with the NCB .

text: 6. Extending the resolution regime to credit unions

text: 6.1 Under the draft law, Polish credit unions will be subject to both the regular deposit guarantee scheme and the resolution scheme. To that end, the draft law creates separate sub-funds, i.e. the credit unions’ guarantee fund and the credit unions’ resolution fund, and includes specific provisions related to the resolution of credit unions and safeguarding their depositors. 6.2 The ECB was consulted on the existing Law on credit unions several times . In its opinions, the ECB especially recommended the inclusion of credit unions in NBP’s minimum reserves regime and within the scope of KNF’s financial supervision . The ECB notes that these elements are now part of the credit unions’ regulatory framework, together with the inclusion of credit unions in the current deposit guarantee scheme. 6.3 The ECB understands that the draft law aims to complement the existing legal provisions in order to establish a comprehensive legal framework for credit unions in view of their increasing importance in the Polish banking sector. In view of the above, the ECB welcomes the extension of the resolution regime to credit unions, as a natural consequence of their being subject to KNF supervision and the deposit guarantee scheme.

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

text: Done at Frankfurt am Main, 28 May 2015.

text: [signed]

text: The President of the ECB

text: Mario DRAGHI


text: Ares(2015)1788320 – 28.4.2015.

text: Rådets förordning

text: (EG) nr 2494/95

text: av den 23 oktober 1995 om harmoniserade konsumentprisindex (EGT L 257, 27.10.1995, s. 1).

text: COM/2014/0724 final - 2014/0346 (COD).

text: Se punkt 2.3 i ECB:s yttrande

publisher: Europeiska centralbanken

sprak: sv

title: Europeiska centralbankens yttrande av den 1 juni 2015 om ett förslag till kommissionens förordning om ändring av förordning (EG) nr 1708/2005 om fastställande av närmare bestämmelser för genomförandet av rådets förordning (EG) nr 2494/95 avseende den gemensamma referensperioden för harmoniserat index över konsumentpriser (CON/2015/18)

serie: con

text: Inledning och rättslig grund

type: rubrik

text: Den 28 april 2015 mottog Europeiska centralbanken (ECB) en begäran från Europeiska kommissionen om ett yttrande över ett förslag till kommissionens förordning om ändring av

text: kommissionens förordning (EG) nr 1708/2005

text: rådets förordning (EG) nr 2494/95

text: avseende den gemensamma referensperioden för harmoniserat index över konsumentpriser, och om ändring av förordning

text: (EG) nr 2214/96

text: (nedan kallat förslaget till förordning).

type: stycke

text: ECB:s behörighet att avge ett yttrande grundar sig på artiklarna

text: och

text: i fördraget om Europeiska unionens funktionssätt. Förslaget till förordning faller inom ECB:s behörighetsområde eftersom det berör referensperioden för det harmoniserade indexet över konsumentpriser (HIKP). Detta index är en nyckel-indikator för ECB:s huvudmål att upprätthålla prisstabilitet i euroområdet, enligt vad som framgår av artikel 127.1 i fördraget samt av

text: artikel 2

text: första meningen i stadgan för Europeiska centralbankssystemet och Europeiska centralbanken. I enlighet med

text: artikel 17.5

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

text: 1. Allmänna kommentarer

text: 1.1 ECB stöder syftet med förslaget till förordning, att uppdatera referensperioden för HIKP så att de resulterade indexen är jämförbara och relevanta. Harmoniserade konsumentprisindex med väldefinierade referensperioder är viktiga indikatorer för penningpolitiken. Bra penningpolitiska beslut är beroende av tillförlitlig och aktuell HIKP-statistik som stöder Eurosystemets uppgifter inom området finansiell stabilitet.

text: 1.2 ECB vill understryka att skyldigheten att höra ECB inte bara grundar sig på

text: artikel 5.3 i rådets förordning (EG) nr 2494/95

text: utan även på de bestämmelser i fördraget som anges ovan. ECB upprepar sitt tidigare förslag att skäl 2 i förslaget till Europaparlamentets och rådets förordning om harmoniserade index för konsumentpriser och om upphävande av förordning

text: (EG) nr 2494/95

text: bör spegla skyldigheten att höra ECB om alla rättsakter som berör HIKP-ramverket.

type: vagledning

utgivare: ecb


text: Council Decision 98/415/EC of 29 June 1998

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

text: Directive

text: of the European Parliament and of the Council of 15 May 2014 establishing a framework for the recovery and resolution of credit institutions and investment firms and amending

text: Council Directive 82/891/EEC

text: , and Directives

text: and

text: , and Regulations

text: (EU) No 1093/2010

text: and

text: (EU) No 648/2012

text: , of the European Parliament and of the Council (OJ L 173, 12.6.2014, p. 190).

text: Directive

text: of the European Parliament and of the Council of 16 April 2014 on deposit guarantee schemes (OJ L 173, 12.6.2014, p. 149).

text: Established by

text: Regulation (EU) No 806/2014

text: of the European Parliament and of the Council of 15 July 2014 establishing uniform rules and a uniform procedure for the resolution of credit institutions and certain investment firms in the framework of a Single Resolution Mechanism and a Single Resolution Fund and amending

text: Regulation (EU) No 1093/2010

text: (OJ L 225, 30.7.2014, p. 1).

text: Law 9/2012 of 14 November 2012 on the restructuring and resolution of credit institutions (BOE 275 of 15.11.2012).

text: See ECB Opinion

text: , Opinion

text: and Opinion

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

text: In line with Directive

text: the scope of the draft law includes investment firms.

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

text: conferring specific tasks on the European Central Bank concerning policies relating to the prudential supervision of credit institutions (OJ L287, 29.10.2013, p. 63).

text: Directive

text: of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, amending Directive

text: and repealing Directives

text: and

text: (OJ L 176, 27.6.2013, p. 338).

text: See ECB Opinion

sprak: en

title: Opinion of the European Central Bank of 10 June 2015 on the recovery and resolution of credit institutions and investment firms (CON/2015/19)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 10 June 2015 on the recovery and resolution of credit institutions and investment firms (

text: ) Introduction and legal basis

text: On 13 May 2015 the European Central Bank (ECB) received a request from the Spanish Secretary of State for Economic Affairs and Business Support for an opinion on a draft law on the recovery and resolution of credit institutions and investment firms (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: Article 2(1) of Council Decision 98/415/EC

text: , as the draft law relates to the Banco de España 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: The purpose of the draft law is to implement Directive

text: of the European Parliament and of the 2 3 Council and Directive

text: of the European Parliament and of the Council . The draft law introduces provisions to establish a national resolution mechanism, as envisaged under Directive 2014/59, as well as for coordination of this national resolution mechanism with the Single Resolution Mechanism , which should be fully operational from 2016. The draft law builds on Law 9/2012 on the restructuring and resolution of credit institutions , which took into account the preparatory work underlying Directive

text: . The draft law is a recast of Law 9/2012 including the transposition of those aspects of Directive

text: pending implementation. The draft law repeals Law 9/2012 for the sake of clarity.

text: 2. Scope of this Opinion

text: This Opinion focuses on aspects of the draft law that have an impact on the Banco de España. It should be noted that the ECB had previously been consulted on the main elements of Law 9/2012 .

text: 3. The Banco de España’s role

text: 3.1 The ECB notes that the draft law provides for a separation of resolution powers into recovery and preparatory resolution powers (the so-called ‘resolution prevention functions’) including resolution planning, which are allocated to the Banco de España for credit institutions and to the National Securities Market Commission for investment firms , and executive resolution powers, such as applying resolution tools, which are allocated to the FROB. 3.2 While such separation of resolution powers is permitted under Directive

text: on an exceptional basis, it needs to be ensured that such separation does not hamper the effectiveness of resolution action. Separation creates a need for close cooperation and adequate information sharing between the FROB and the Banco de España, and the FROB and the National Securities Market Commission, notably to ensure that timely resolution action can be taken. Given that the Banco de España will be in the lead for resolution planning and the FROB will be responsible for execution, it is essential that there is a common understanding on the resolution plan. The ECB welcomes the fact that the draft law, in this respect, has specific provisions on the cooperation and coordination between national authorities and with other authorities such as the Single Resolution Board, the ECB and foreign authorities assigned supervision or resolution tasks. Similarly, the ECB welcomes the provisions on functional and hierarchical separation between supervision on the one hand, and recovery and preparatory resolution powers on the other, as well as the legislator’s stated purpose to review this institutional set-up in light of the experience gained from the Single Resolution Mechanism in order to increase its efficiency. 3.3 As mentioned above, the draft law assigns the Banco de España powers provided for in Directive

text: which are viewed by the legislator as being closer in nature to the supervisory tasks of the Banco de España under

text: Regulation (EU) No 1024/2013

text: , such as preparing resolution plans and assessing resolvability for the purpose of opening a resolution process. In this respect, the ECB notes that Directive

text: assigns the failing or likely to fail assessment to the respective supervisory authority, i.e. the ECB or national competent authorities, in line with the distribution of competences provided for in

text: Regulation (EU) No 1024/2013

text: . The ECB also notes that, pursuant to

text: Article 9(1)

text: , subparagraph 2,

text: Article 4(1)

text: (e) and

text: Article 4(3) of Council Regulation (EU) No 1024/2013

text: , and

text: Article 104(1)

text: (b) of Directive

text: of the European Parliament and

text: of the Council , the ECB shall have all the powers of the competent and designated authorities under the applicable Union law to ensure compliance with regard to significant institutions . 3.4 The Banco de España is also entrusted with checking the financial resilience of the Deposit Guarantee Fund (DGF) at least every three years in view of its role as bank supervisor and its statutory function of promoting financial stability. The ECB understands that these stress tests to a large extent rely on the results of the stress tests the Banco de España is already required to perform on credit institutions. Hence, it does not constitute a substantive change in the supervisory and financial stability tasks carried out by the Banco de España and is expected to have a very small impact on the overall functions carried out by it. In addition to stress testing the financial condition of the DGF, the authorities should mandate the DGF to conduct regular testing of systems and other operational capabilities as required under

text: Article 4(10) of Directive 2014/49/EU

text: Done at Frankfurt am Main, 10 June 2015.

text: [signed]

text: The President of the ECB

text: Mario DRAGHI


text: Council Decision 98/415/EC of 29 June 1998

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

text: Article 8 of the draft directive.

text: Article 8 of the draft directive.

text: Article 7 of the draft directive. 5 Article 9 of the draft directive and Annex II thereof. 6 Article 3 of the draft directive. 7 Article 10 of the draft directive. 8 Decision of the European Central Bank ECB/2014/6 of 24 February 2014 on the organisation of preparatory measures for the collection of granular credit data by the European System of Central Banks (OJ L 104, 8.4.2014, 9 Depending on the circumstances, this may also be the case for other euro area Member States and central banks. 10

text: Article 5(1)

text: (c) of the Central Bank of Malta Act (Cap. 204 of the Laws of Malta).

text: A similar provision is also found in Article 18(1) of the Malta Financial Services Authority Act (Cap. 330 of the Laws of Malta). 12 This understanding is based on

text: Article 6(2) of Council Regulation (EU) No 1024/2013 of 15 October 2013

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

text: Article 21 of Regulation (EU) No 468/2014 of 16 April 2014

text: of the European Central Bank establishing the framework for cooperation within the Single Supervisory Mechanism between the European Central Bank and national competent authorities and with national designated authorities (SSM Framework Regulation) (ECB/2014/17) (OJ L 141, 14.05.2014, p. 1). 13

text: Article 5 of Council Regulation (EU) No 1024/2013 of 15 October 2013

text: See, e.g., Opinion

text: , paragraph 2.1 and Opinion

text: , paragraph 2.2. 15 Annex 1 of the draft directive.

title: Opinion of the European Central Bank of 19 June 2015 on a central credit register (CON/2015/20)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 19 June 2015 on a central credit register (

text: ) Introduction and legal basis

text: On 8 April 2015, the European Central Bank (ECB) received a request from the Central Bank of Malta (CBM) for an opinion on a draft bill amending the Central Bank of Malta Act (Cap. 204 of the Laws of Malta) and a draft Central Bank of Malta Directive No 14 on a central credit register (hereinafter the ‘draft bill’ and the ‘draft directive’, respectively and together referred to as the ‘draft laws’). 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, fourth and sixth indents of

text: , as the draft laws relate to the CBM, the collection, compilation and distribution of financial and banking statistics, 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 draft laws

text: 1.1 The draft bill 1.1.1 The draft bill provides for the establishment and operation of a central credit register (hereinafter the ‘Register’) at the CBM. The Register will contain non-anonymised, granular information on the actual and contingent exposures of natural or legal persons, whether resident in Malta or not, arising from credit and other facilities granted to them by credit institutions. The Register will be used to support (a) the centralisation of information on credit exposures, (b) the analysis of the stability of the financial system, (c) the implementation of monetary policy, (d) the compilation of statistics and (e) the assessment of credit risk. 1.1.2 The draft bill authorises the CBM to provide access to the information held in the Register to national central banks and other institutions of Member States having comparable databases, on the basis of reciprocity. It also empowers the CBM to collect information from the National Statistics Office, when necessary for the discharge of the CBM’s duties in relation to the Register. The draft bill ensures that borrowers have the right to obtain the information detailing their own exposures which is stored in the Register.

text: 1.1.3 The draft bill authorises the CBM to issue directives that impose requirements on credit and other institutions to provide information to the Register and set out the conditions for granting access to the data held in the Register, including the imposition of fees. 1.2 The draft directive 1.2.1 The draft directive requires credit institutions to report to the CBM, on a monthly basis, the end of month balances of exposures related to granting credit facilities. It also sets out rules regulating the right of access of credit institutions to the data held in the Register. These rules clarify that (a) the data to be accessed will not include a reference to the credit institution granting the credit facility , (b) the information accessed by credit institutions may not be transmitted to third parties and must 3 4 only be used for the purpose of assessing credit risk , (c) retention periods will be established and (d) the written consent of the borrower is required before a credit institution may access data relating to his credit exposures. The draft laws are also without prejudice to laws on data protection and each credit institution must designate a maximum of three employees as authorised representatives for the purpose of accessing the Register . 1.2.2 The CBM will charge fees to credit institutions for accessing the Register based on annual fees calculated on the basis of the cost incurred by the CBM in hosting the Register, alongside the credit institution’s share in credit exposure over the previous calendar year, and access fees in respect of specific requests. The precise amount of fees has not yet been established.

text: 2. General observations

text: 2.1 The ECB welcomes the draft laws. The Register will enable the CBM to create a national granular credit database of the type referred to in Decision ECB/2014/6 , in respect of which the CBM has a derogation until 30 June 2016 under

text: Article 3(3)

text: . By virtue of Decision ECB/2014/6 addressed to Eurosystem central banks, preparatory measures are required to be taken by these central banks so that, within the given timeframe, the following is achieved: (a) national granular credit databases operated by all of them, and (b) a common granular credit database shared between all of them and comprising granular credit data for all Member States whose currency is the euro. In addition, in the Maltese context , the Register would also contribute to the CBM’s function to ensure the stability of the Maltese financial system . 2.2 From the perspective of credit institutions, the Register will enable more informed assessments of credit risk, both in terms of the initial decision to grant a credit facility and in terms of ongoing

text: assessments of existing exposures. The Register therefore enhances credit institutions’ risk management capabilities. 2.3 The ECB is currently developing a long-term legal framework for the collection of granular credit and risk data by the ECB and the European System of Central Banks. This framework will define harmonised reporting requirements for credit data in all reporting Member States. The finalisation of this long-term legal framework may impact the draft laws, for example by requiring additional data attributes to be collected and/or a different feedback loop to reporting agents. This means that the draft laws may need to be amended in the near future.

text: 3. Exchange of information

text: 3.1 The draft bill provides that the CBM may provide information held in the Register to national central banks and other institutions of Member States that have comparable databases, on the basis of reciprocal arrangements. In this respect, the ECB notes that the scope of the data collected by different credit registers will continue to vary across Member States until further harmonisation is achieved, with the result that the exchange of information under this provision may not be possible in certain cases. Moreover, as the ECB does not currently have a comparable register, it cannot be provided with information in the Register on the basis of this particular provision. 3.2 The ECB notes that the information in the Register constitutes a useful tool for the micro-prudential supervision of credit institutions. From a financial stability and macro-prudential perspective, the information in the Register would allow the monitoring and assessment of the build-up and appetite for credit risk in the banking system generally, thereby helping to calibrate the use of macroprudential instruments. The draft law does not contain an explicit provision allowing the information on the Register to be accessed by the ECB or by the Malta Financial Services Authority (MFSA), the national supervisor of credit institutions. However, under Article 37(1) of the Central Bank of Malta Act, the CBM is required to pass on to the MFSA any information in its possession or to which it has access when so requested by the MFSA in the exercise of its duties under law . The ECB also understands that, subject to data protection requirements, the ECB may, in the exercise of its supervisory duties relative to credit institutions, require the MFSA to request and pass on information contained in the Register . This point is also relevant in the context of the macroprudential tasks conferred on the ECB in

text: Council Regulation (EU) No 1024/2013

text: , which requires the ECB to take into account the specific situation of the financial system, economic situation and the economic cycle in the individual Member States or parts thereof.

text: 3.3 Regarding the access of the ECB to the information contained in the Register for statistical and monetary policy (as distinct from supervisory) purposes, the ECB notes that it may be entitled to access certain information contained in the Register under Article 41 of the Central Bank of Malta Act, which provides that the CBM may disclose information to ‘international or other bodies’ when this is required pursuant to international obligations. Subject to data protection considerations, the ECB understands that this provision would limit the ECB’s access to the Register to where the CBM is required to disclose information to the ECB. Consideration should therefore be given to amending the draft laws or the Central Bank of Malta Act to ensure a clearer legal basis for the ECB’s access rights to the information contained in the Register, as has been done in other Member States .

text: 4. Specific additional observations

text: 4.1 The scope of the draft directive is restricted to credit institutions, whereas the draft bill allows the CBM to impose reporting requirements on ‘credit and other institutions’. The CBM may wish to consider extending reporting obligations to financial institutions that are not credit institutions. 4.2 The ECB notes that some definitions of the data attributes to be reported under the draft directive, particularly credit data variables and credit data measures , could be defined in a more specific manner in order to ensure more consistent reporting by credit institutions. In particular, the data attribute ‘specific credit risk adjustment’ is defined very widely.

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

text: Done at Frankfurt am Main, 19 June 2015.

text: [signed]

text: The President of the ECB

text: Mario DRAGHI


title: Opinion of the European Central Bank of 1 July 2015 on consumer protection in the financial markets  (CON/2015/21)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 1 July 2015 on consumer protection in the financial markets (

text: ) Introduction and legal basis

text: On 29 October 2014, the European Central Bank (ECB) received a request from the Slovak Ministry of Finance for an opinion on a draft law amending Law No 747/2004 on supervision of the financial markets and amending certain laws (hereinafter the ‘draft law’). In addition to Law No 747/2004, the draft law also amends Law No 566/1992 on Národná banka Slovenska and certain other laws, such as Law No 129/2010 on consumer credit and other credits and loans to consumers. It is noted that the draft law was adopted by the Slovak Parliament on 26 November 2014 and signed by the President on 10 December 2014. In the course of the legislative process, further amendments were made to 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 second, third and sixth indents of

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

text: , as the draft law relates to means of payment, Národná banka Slovenska (NBS) and rules applicable to financial institutions which 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: Previously to the draft law, no authority in Slovakia was competent to conduct supervision in the field of consumer protection in the financial markets , with the exception of the provision of consumer credit, for which the Slovak Trade Inspection is the supervisory authority. In order to address this situation, the draft law extends the scope of NBS supervision of the financial markets to include responsibility for consumer protection . In order to facilitate the exercise of this additional responsibility, the draft law introduces a number of sanctions and enforcement measures which NBS will be entitled to impose for breach of an obligation in the field of financial consumer protection . Under the draft law, minor and obvious breaches will be dealt with via simplified proceedings . Members of staff of NBS authorised to carry out on-site supervision will have the authority to order, on the spot, a supervised entity to take immediate action to

text: Council Decision 98/415/EC of 29 June 1998

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

text: 2 See point 4.2 (impact assessment) of the explanatory memorandum to the draft law.

text: 3 Point 2 of Article I of the draft law.

text: 4 Point 26 of Article I of the draft law.

text: 5 ibid., in particular new sections 35b and 35c. eliminate any breach which has been identified. They may also order a supervised entity to suspend the provision or intermediation of the financial service affected by such breach until it has been eliminated . The draft law provides that, under certain circumstances, NBS will have the power to withdraw a supervised entity’s permit or other authorisation allowing it to engage in an activity related to the financial markets, or to strike it off the relevant register of entities authorised to engage in activity related to the financial markets . A proportion of the costs incurred by NBS in the protection of financial consumers will be covered by a surcharge on annual contributions paid by entities supervised by NBS. This will be paid ex post and only by those supervised entities which have breached their obligations in relation to the protection of financial consumers or violated the rights of financial consumers . The draft law also amends certain rules on how supervision is carried out. It provides for ‘mystery shoppingʼ exercises and the conclusion, for supervisory purposes, of a financial services contract with a supervised entity . In addition, a party which has initiated proceedings before NBS may be allowed to submit technical documentation, or other annexes to the application, in a foreign language . As regards the amendments to Law No 566/1992, the draft law proposes to increase the number of board members of NBS from five to six and to extend their term of office from five to six years . Current board members will not be affected by these new provisions . The draft law prohibits the use of the terms ‘coinʼ, ‘banknoteʼ and ‘currencyʼ in the specification or description of a token, medal, means of payment or analogous technical means, or other tangible or intangible items related to the production, offer, sale, or dissemination of such a token, medal, means of payment or analogous technical means. This prohibition extends to words that contain such terms, as well as to related translations . Finally, the draft law amends Law No 747/2004 to include references to the role of NBS within the Single Supervisory Mechanism .

text: 2. General observations

text: 2.1 As indicated, no authority in Slovakia was competent to conduct supervision in the field of consumer protection in the financial market . The new task allocated to NBS’s in respect of consumer protection in the financial markets is not listed among the functions of national central banks set out in the Statute of the European System of Central Banks and of the European Central Bank (hereinafter the ‘Statute of the ESCB’).

text: 6 Point 26 of Article I of the draft law (new section 35d).

text: 7 Point 26 of Article I of the draft law (new section 35g). However, please see the observation of the ECB below.

text: 8 Points 29 and 35 of Article I of the draft law and the corresponding parts of the special part of the explanatory memorandum.

text: 9 Points 11, 12, 13 and 15 of Article I.

text: 10 Point 12 of Article I.

text: 11 Point 17 of Article I.

text: 12 Points 4 and 6 of Article II.

text: 13 Point 17 of Article II.

text: 14 Point 9 of Article II.

text: 15 Points 5, 6 and 7 of Article I.

text: 16 With exception of consumer credit, see paragraph 1 of this opinion. 2.2 The ECB underlines that, in the context of a proposed conferral of tasks on an ESCB member, it is necessary to assess such conferral against the prohibition of monetary financing under Article 123 of the Treaty. The ECB has developed the following guidance, in the form of general and specific considerations, on the basis of which the ECB may decide whether a new task conferred on an ESCB national central bank (NCB) is to be considered a central banking task or a government task for the purposes of the monetary financing prohibition. 2.2.1 General considerations First, the systematic categorisation of tasks assigned to NCBs as central banking or government tasks applies to genuinely new tasks that did not exist in the past or did not form an integral part of the central banking tasks already assigned to the NCB. In recognition of the different EU Member States’ legal frameworks, central banking traditions and national set-ups, the tasks currently discharged by an NCB as central banking tasks are not reviewed and re-categorised, but may be reassessed if they are subject to legislative amendments of substance. Second, the principle of financial independence requires that the Member States may not put their NCBs in a position where they have insufficient financial resources to carry out their ESCB or Eurosystem-related tasks, as applicable. Third, central banking tasks comprise in particular those tasks that are related to the tasks listed in

text: Article 127(2)

text: , (5) and (6) of the Treaty. Fourth, new tasks conferred on an NCB which are atypical of NCBs’ tasks, or which are clearly discharged on behalf of and in the exclusive interest of the government or of other public entities, should be considered as government tasks. In that context, a distinction should be drawn between liquidity and solvency-related tasks of NCBs. While, for purposes of the monetary financing prohibition, solvency support is a government task, liquidity-related tasks, the ultimate objective of which are to finance the economy, are central banking tasks. 2.2.2 Specific considerations An important criterion for classifying a new task as a government task is, therefore, the impact of the task on the institutional, financial and personal independence of the NCB. In particular, the following should be taken into account. First, it should be assessed whether the performance of the new task creates inadequately addressed conflicts of interests with existing central banking tasks, and does not necessarily complement those existing central banking tasks. If a conflict of interest arises between existing and new tasks, there should be sufficient mitigation in place to adequately address that conflict. Complementarity between the new task and existing central banking tasks should not, however, be interpreted extensively, so as to lead to the creation of an indefinite chain of ancillary tasks. Complementarity should also be examined from the point of view of the financing of those tasks. Second, it should be assessed whether without new financial resources the performance of the new task is disproportionate to the financial or organisational capacity of the NCB concerned, and may negatively impact its capacity to properly perform existing central banking tasks. Third, it should be assessed whether the performance of the new task does not fit into the institutional set-up of the NCB in the light of central bank independence and accountability considerations. Fourth, it should be assessed whether the performance of the new task harbours substantial financial risks. Fifth, it should be assessed whether the performance of the new task exposes the members of the NCB’s decision-making bodies to political risks which are disproportionate and may also impact on their personal independence and, in particular, the guarantee of the term of office under Article 14.2 of the ESCB Statute. 2.2.3 Any final assessment on the qualification of a task given to an NCB as either falling within the scope of a central banking task or a government task will be guided by the objective of ensuring the consistent application of the prohibition of monetary financing within the Eurosystem and the ESCB to the extent that it applies to its members.

text: 3. Specific observations

text: 3.1 Consumer protection not atypical central banking task The ECB has consistently expressed the view that consumer protection tasks discharged by an NCB will be central banking tasks, and therefore that no monetary financing issue arises, provided that those tasks “complement existing supervisory powers and thus contribute to the soundness of the financial market and the preservation of confidence in the marketplace” . Sufficient mitigation measures must be put in place to ensure that in case of a conflict of interests supervisory considerations prevail. 3.2 Links to basic tasks listed in

text: Article 127(2)

text: , (5) and (6) of the Treaty Financial consumer protection as a task complementary to existing supervisory powers may be considered a task related to the tasks referred to in Article 127(5) of the Treaty, particularly where an NCB already has a mandate for supervision in financial markets, which is the case with NBS. 3.3 Consumer protection as a task complementary to existing supervisory powers In accordance with the above, the new task entrusted to NBS can be considered a central banking task, as it complements its existing supervisory powers over entities active in the financial markets already supervised by NBS, is financed as part of a system of (partial) financing of NBS’s supervisory tasks via contributions and fees related to supervision, and contributes to the soundness of the financial markets and the preservation of confidence in the markets. In this regard, the ECB welcomes the consulting authority’s aim of ensuring that NBS has effective means to enforce compliance with the rules on financial consumer protection.

text: 17 See, for example, ECB Opinions

text: , and

text: . All ECB Opinions are on the ECB's website at www.ecb.europa.eu. 3.4 Conflict of interests between consumer protection and supervisory tasks; fitting of the new task within NBS’s institutional set-up 3.4.1 Under the draft law, in the protection of financial consumers, NBS will carry out activities and exercise authorisation pursuant to Law No 747/2004 . The draft law empowers NBS to impose specific administrative measures for breaches of obligations in the field of consumer protection in the financial markets. Such specific administrative measures include monetary penalties, banning unfair commercial practices or unacceptable conditions disadvantaging financial consumers, banning the provision of a financial service not complying with consumer protection rules, and withdrawal of an authorisation or permit. 3.4.2 The ECB notes that, pursuant to Article 1(1) of Law No 747/2004, when exercising such powers, NBS should take into account the general objective of financial market supervision in order to contribute to the stability of the financial market as a whole, as well as to the safe and smooth operation of the financial markets in the interests of maintaining the credibility of the financial markets, the protection of customers, and compliance with competition law. In this respect, the ECB understands that NBS, as the sole authority responsible for supervision under Law No 747/2004, will be required to mitigate any potential conflict of interests between its consumer protection tasks and its financial stability mandate by always taking financial stability considerations into account when imposing a sanction or enforcement measure for a breach of an obligation in the field of financial consumer protection. In this regard, given the complementarity of the consumer protection task, that new task fits into NBS’s institutional set-up. 3.4.3 In view of the primacy of Union legislation, the ECB also notes that when NBS considers that it is necessary to withdraw a credit institution’s authorisation under section 35g of the draft law, it must give full regard to

text: Article 4(1)

text: (a) and

text: Article 14(5) of Council Regulation (EU) No 1024/2013

text: , which assign to the ECB the exclusive competence to withdraw a credit institution’s authorisation, and submit a proposal to the ECB to that end. In that case, the ECB will take a decision on the proposed withdrawal of authorisation, taking into account the justification for withdrawal put forward by NBS. 3.5 Financial independence; proportionality to the organisational capacity of NBS to perform its tasks The principle of financial independence requires NCBs to have sufficient means to carry out not only their ESCB-related tasks from an operational and financial point of view, but also their national tasks. In this regard, the ECB notes that additional expenses for NBS resulting from the assumption of its new tasks and powers in the field of consumer protection in the financial markets are to be financed by a surcharge on annual contributions of entities supervised by NBS being a part of a system of (partial) financing of NBS’s supervisory tasks via contributions and fees related to supervision . The ECB further notes that the surcharge will not be payable regularly and by all supervised entities, but only by those which, pursuant to a final decision of NBS, are found to have

text: 18 See point 26 of Article I of the draft law (new Section 35a of Law No 747/2004).

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

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

text: 20 See Section 39 et seq. of the Law No 747/2004. breached their obligations in the field of financial consumer protection or violated the rights of financial consumers. However, entities which have been subject to sanctions or other enforcement measures imposed in simplified proceedings, and addressees of interim measures, will not be subject to this fee. It will not be possible to estimate the amount of proceeds from the surcharge. However, considering that the task is complementary to existing supervisory tasks and that a proportion of the costs incurred by NBS in financial consumer protection will be covered by the surcharge, the performance of the new task cannot be considered disproportionate to NBS’s financial or organisational capacity and should not negatively impact on its capacity to properly perform its existing central banking tasks. 3.6 Extent to which the performance of tasks harbours substantial or disproportionate risks Given that the new consumer protection task may be considered complementary to existing supervisory tasks which are partially financed via contributions and fees related to supervision, these tasks bear similar financial and political risks as supervision. In this regard, such risks should not be considered substantial or disproportionate to the supervisory tasks already assumed by NBS. This opinion will be published on the ECB’s website. Done at Frankfurt am Main, 1 July 2015. [signed] The President of the ECB Mario DRAGHI


text: Draft law on recovery measures and resolution of crisis in the financial markets (Navrh zakona o ozdravnych postupech a reseni krize na financnim trhu) and draft law amending certain other laws in connection with the adoption of that law (Navrh zakona kterym se meni nektere zakony v souvislosti s prijetim zakona o ozdravnych postupech a reseni krize na financnim trhu). The versions of the draft laws provided by the MoF were its draft proposals of 19 March 2015 after conclusion of an inter-ministerial consultation. 2

text: on the consultation of the European Central Bank by national authorities regarding draft legislative provisions (OJ L 189, 3.7.1998, p. 42). 3 Directive

text: of the European Parliament and of the Council of 15 May 2014 establishing a framework for the recovery and resolution of credit institutions and investment firms and amending

text: Council Directive 82/891/EEC

text: , and Directives

text: and

text: , and Regulations

text: (EU) No 1093/2010

text: and

text: (EU) No 648/2012

text: , of the European Parliament and of the Council (OJ L 173, 12.6.2014, p. 190).

text: See Article 2 of the draft law, which defines the obliged entities in accordance with the definitions in

text: Article 2

text: BRRD. 5 Articles 1 and 4 of the draft law. 6

text: Article 5

text: and Part Six of the draft law. 7 Part Six, Title II of the draft law. 8 Articles 35 and 37 of the BRRD. 9 Article 81 of the draft law. 10 Article 214(1) of the draft law. 11

text: Article 165(1)

text: and (2) of the draft law. 12 For the purposes of Article 168 of Law No182/2006 Coll. on Insolvency. The draft amending law sets out the order of preference of creditor claims, including, for example, the claims of covered depositors and those of the Scheme, but without making reference to the preferential claims of ČNB. See the proposed new Article 374 of Law No168/2006 Coll. on insolvency.

text: For example, under Article 41(6) of the draft law for the costs of putting an institution under temporary administration, under

text: Article 47(3)

text: for the costs of valuation of the institution prior to resolution, and under

text: Article 81(5)

text: for the costs of direct administration. 14

text: Article 195

text: et seq. of the draft law (Part 9, Title II). 15

text: Article 185

text: et seq. of the draft law (Part 9, Title I). 16

text: Article 185

text: et seq. of the draft law. 17 I.e. within the meaning of Czech National Council Law No 576/1990 Coll. on the rules for financial management of the budgetary funds of the Czech Republic and of municipalities in the Czech Republic. 18 Article 185(5) of the draft law. 19 Part Nine, Articles 185-188 of the draft law. 20 Article 194 of the draft law. 21 See new

text: Article 33

text: a which will be inserted into Law No 6/1993 Coll. On ČNB, and new

text: Article 41

text: a(4), which will be inserted into Law No 21/1992 Coll. on banks.

text: Pursuant to amendments to be made to

text: Article 41

text: a(4) of Law No 21/1992 Coll. on banks.

text: This position departs from the one set out in Opinions

text: and

text: . All ECB opinions are available on the ECB website at www.ecb.europa.eu. 24 See the ECB’s 2014 Convergence Report, p. 30. 25 In this regard, see paragraph 1.3 and footnote 21 for references to the proposed amendments to Law No 6/1993 Coll. on ČNB and to Law No 21/1992 Coll. on banks.

text: Article 187(2)

text: (c) of the draft law. 27 See the ECB’s 2014 Convergence report, p. 30. 28 Ibid. 29

text: Article 5

text: and Chapter VI (Crisis resolution at obliged entities) of the draft law.

text: See the ECB’s 2014 Convergence Report, p. 25. 31 Article 165 of the draft law. 32 See footnote 10 above. 33 See paragraph 3.3 of Opinion

text: . 34 See, e.g., Opinion CON/201/14/60, paragraph 4.1; Opinion

text: , paragraph 2.1; Opinion

text: , paragraph 2.3; Opinion

text: paragraph 2.2; Opinion

text: , paragraph 2.2. See further in the U.K. the role of the Bank of England in the Special Resolution Regime under the Banking Act 2009. 35 Article 2 of Law No 6/1993 Coll. on ČNB. See also in regard to the competence of ČNB’s Board, Article 214(2) of the draft law.

text: For example see Opinion

text: , paragraph 4.3, Opinion

text: , paragraphs 5.1 and 5.2, and Opinion

text: , paragraph 3.3. 37 See the second subparagraph of

text: Article 3(3) of Directive 2014/59/EU

text: . 38 See

text: Regulation (EU) No. 575/2013

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

text: Regulation (EU) No 648/2012

text: (OJ L 176, 27.6.2013, p. 1), and Directive No.

text: of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, amending Directive

text: and repealing Directives

text: and

text: (OJ L 176, 27.6.2013, p. 338). 39 See Opinion

text: , paragraph 3.1. 40

text: Article 5(1)

text: and (2) of the draft law. See also page 73 of the explanatory memorandum to the draft law.

text: Articles 214 and 215 of the draft law. 42 Article 96(2) of the draft law. 43 Pursuant to Law No 82/1998 Coll. on State liability. 44 See Articles 16-18 of Law No. 82/1998 Coll. on State liability.

text: See the ECB’s 2014 Convergence Report, p. 29.

text: Article 16(4) of the draft law. 47 Article 8(3) of the draft law. 48 See paragraph 3.2 of Opinion

text: and paragraph 3.3 of Opinion

text: . 49 Article 165(4) of the draft law and Article 168 of Law No 168/2006 Coll. on Insolvency.

title: Opinion of the European Central Bank of 1 July 2015 on recovery and resolution in the financial market (CON/2015/22)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 1 July 2015 on recovery and resolution in the financial market (

text: ) Introduction and legal basis

text: On 27 March 2015 the European Central Bank (ECB) received a request from the Czech Ministry of Finance (MoF) for an opinion on a draft law on recovery and resolution in the financial market (hereinafter the ‘draft law’) and on a draft law amending certain laws connected with the adoption of the draft law (hereinafter the ‘draft amending law’; together with the draft law, the ‘draft laws’). The MoF asked for the adoption of the ECB’s opinion on an urgent basis within one month in line with

text: Article 3 of Council Decision 98/415/EC of 29 June 1998

text: . 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 (the ‘Treaty’) and the third and sixth indents of

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

text: , as the draft laws relate to Česká národní banka (ČNB) and rules applicable to financial institutions insofar as they materially influence the stability of financial institutions and markets. For elements of the draft laws the exclusive purpose of which is the implementation of Union law, the ECB’s competence to deliver an opinion is based on Article 25.1 of the Statute of the European System of Central Banks and of the European Central Bank (hereinafter the ‘Statute of the ESCB’). In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.

text: 1. Purpose of the draft laws

text: 1.1 The purpose of the draft laws is to implement into Czech law Directive

text: of the European Parliament and of the Council (the Bank Recovery and Resolution Directive, or ‘BRRD’) , thereby providing a legal framework for the recovery and resolution of certain types of entities participating in the financial markets, including credit institutions, investment firms, and

text: financial holding companies that have their head office in the Czech Republic (hereinafter ‘obliged entities’) . 1.2 The draft law regulates plans and procedures for the recovery and resolution of obliged entities at both individual and group level, the status and powers of the competent supervisory authority and resolution authority, and the procedures under which they may intervene in distressed entities or subject them to resolution measures in the event that they are failing or likely to fail . The main provisions of the draft law dealing with resolution tasks are as follows.  ČNB, which is the competent authority for supervising the Czech financial markets, is designated as the resolution authority and ČNB’s tasks are broadened to include taking specified recovery and resolution measures in respect of obliged entities .  ČNB is further required to ensure the operational independence of its resolution unit, which has been set up within ČNB by an internal regulation.  To resolve a financial crisis situation at an obliged entity, ČNB may apply a number of ‘crisis resolution measures’ . These measures include, besides the resolution tools provided for by the BRRD , direct administration, which entails ČNB taking control of an institution for an undefined period by suspending the functions of its statutory and supervisory organs and taking decisions in their stead, either by itself or through a ČNB-appointed employee .  In general, ČNB may exercise its resolution powers without limitation or approval. However, ČNB may only apply a crisis resolution measure or order a capital write-down or debt conversion upon the prior approval of the MoF if the proposed action either: (a) requires the use of resources from public funds, provides for the introduction of a State guarantee, or the use of a bridge institution or an asset management entity; or (b) requires the use of resources from the Fund for Crisis Resolution (hereinafter the ‘Resolution Fund’) or from the Deposit Guarantee Scheme (hereinafter the ‘Scheme’) amounting to more than 60% of their available assets .  ČNB is authorised to collect any expenses properly incurred due to the taking of resolution actions from obliged entities and other prescribed persons , and preferential ranking in insolvency is accorded to such claims and to claims arising from loans made by ČNB to obliged entities .

text:  The State is expressly required to pay ČNB’s properly incurred expenses in carrying out certain early intervention and resolution related tasks, if the obliged entity does not have sufficient assets from which to make payment . 1.3 The draft law also lays down arrangements for financing the cost of resolution and minimising the need for State financing of resolution measures. In particular, the draft law:  establishes the Resolution Fund for the financing of resolution measures, to which institutions established in the Czech Republic and Czech branches of institutions established in non-Member States are required to contribute , and sets out the sources of its funding and how those funds may be used;  sets up the Guarantee System for the Financial Market (GSFM), a separate legal entity, to administer in its own name the Resolution Fund and the existing Scheme . GSFM is a sui 16 17 generis entity and is expressly stated not to be a State fund under Czech law . The Resolution Fund and the Scheme are not legal entities but separate accounting units, with separate sources of financing. The financial resources of each fund are ring-fenced by law and are required to be used exclusively for the legally prescribed purposes of that fund. The funds do not belong to the GSFM . Thus, the claims of creditors of either fund arising from performance of the fund’s functions may only be met from the assets of that fund;  provides for the governance of the GSFM through a five-person Supervisory Council whose members are appointed and dismissed by the MoF. The Supervisory Council is composed of two members nominated by the MoF, two members nominated by ČNB and one member nominated by the Czech Banking Association ;  requires the GSFM, ČNB and the MoF to cooperate closely in carrying out their respective tasks and activities including any exchange of information . 1.4 The draft law makes a number of consequential amendments to related laws, including:  to provide that in the event that the Scheme does not have sufficient available financial resources and this situation could affect the stability of the financial markets ČNB may, on application, provide it with a short-term loan for a maximum period of three months, guaranteed by government bonds or other State-guaranteed securities that are held by the Scheme ;

text:  to specify that such loans and repayable financial assistance from ČNB form an additional source of funding for the Scheme’s contributory fund .

text: 2. General observations

text: 2.1 The ECB welcomes the draft laws, as they strengthen the tools and procedures available to ČNB for carrying out effective preventive measures, early intervention and effective resolution in line with the common framework of intervention powers, rules and procedures laid down in the BRRD. 2.2 The ECB stresses, however, that it does not opine on whether the draft laws effectively discharge the obligations of the Czech Republic to implement the BRRD in Czech law, but rather on those provisions that may impact on the role and tasks of ČNB as a central bank and as a member of the European System of Central Banks (ESCB). 2.3 The ECB underlines that, in the context of a proposed conferral of tasks on an ESCB member, it is necessary to assess such conferral against the prohibition of monetary financing under Article 123 of the Treaty. The ECB has developed the following guidance, in the form of general and specific considerations, on the basis of which the ECB may decide whether a new task conferred on an ESCB national central bank (NCB) is to be considered a central banking task or a government task for the purposes of the monetary financing prohibition. 2.3.1 General considerations First, the systematic categorisation of tasks assigned to NCBs as central banking or government tasks applies to genuinely new tasks that did not exist in the past or did not form an integral part of the central banking tasks already assigned to the NCB in the past. In recognition of the different Member States’ legal frameworks, central banking traditions and national set-ups, the tasks currently discharged by an NCB as central banking tasks are not reviewed and recategorised, but may be reassessed if they are subject to legislative amendments of substance. Second, the principle of financial independence requires that the Member States may not put their NCBs in a position where they have insufficient financial resources to carry out their ESCBor Eurosystem-related tasks, as applicable. Third, central banking tasks comprise in particular those tasks that are related to the tasks listed in

text: Article 127(2)

text: , (5) and (6) of the Treaty. Fourth, new tasks conferred on an NCB which are atypical of NCBs’ tasks, or which are clearly discharged on behalf of and in the exclusive interest of the government or of other public entities, should be considered as government tasks. In that context, a distinction should be drawn between liquidity- and solvency-related tasks of NCBs. While, for purposes of the monetary financing prohibition, solvency support is a government task, liquidity-related tasks, the ultimate objective of which are to finance the economy, are central banking tasks. 2.3.2 Specific considerations Resolution tasks discharged by central banks are considered central banking tasks provided that they do not undermine an NCB’s independence in accordance with Article 130 of the Treaty .

text: However, the discharge of these tasks by central banks may not extend to the financing of resolution funds or other resolution financial arrangements as these are government tasks. This is without prejudice to the following: (i) the possibility that central banks may provide short-term financing to deposit guarantee schemes under certain conditions and (ii) the possibility that NCBs may provide emergency liquidity assistance to solvent credit institutions. An important criterion for qualifying a new task as a government task is therefore the impact of the task on the institutional, financial and personal independence of the NCB. In particular, the following should be taken into account. First, it should be assessed whether the performance of the new task creates inadequately addressed conflicts of interests with existing central banking tasks, and does not necessarily complement those existing central banking tasks. If a conflict of interest arises between existing and new tasks, there should be sufficient mitigation in place to adequately address that conflict. Complementarity between the new task and existing central banking tasks should not, however, be interpreted extensively, so as to lead to the creation of an indefinite chain of ancillary tasks. Complementarity should also be examined from the point of view of the financing of those tasks. Second, it should be assessed whether without new financial resources the performance of the new task is disproportionate to the financial or organisational capacity of the NCB and may negatively impact on its capacity to properly perform existing central banking tasks. Third, it should be assessed whether the performance of the new task does not fit into the institutional set-up of the NCB in the light of central bank independence and accountability considerations. Fourth, it should be assessed whether the performance of the new task harbours substantial financial risks. Fifth, it should be assessed whether the performance of the new task exposes the members of the NCB’s decision-making bodies to political risks which are disproportionate and may also impact on their personal independence and, in particular, the guarantee of the term of office under Article 14.2 of the ESCB Statute. 2.3.3 Any final assessment on the qualification of a task given to an NCB as either falling within the scope of a central banking task or a government task will be guided by the objective of ensuring the consistent application of the prohibition of monetary financing within the Eurosystem and the ESCB to the extent that it applies to its members.

text: 3. Specific observations

text: 3.1 ČNB’s role in providing temporary liquidity to the GSFM 3.1.1 ČNB will be authorised to provide under certain conditions a temporary (for up to three months) State-guaranteed loan to the Scheme’s contributory fund . Although it is not stated expressly,

text: the ECB understands that an application for such a temporary or ‘bridging’ loan would come from the GSFM as administrator of the Scheme and that, if approved by ČNB in its sole discretion, the temporary loan would be provided under a contract between ČNB and the GSFM as debtor . The draft law does not stipulate further the material terms and conditions (e.g. pricing terms) of any such loan. 3.1.2 The ECB underlines that national legislation which provides for the financing by an NCB of a national deposit guarantee scheme for credit institutions will only be compatible with the monetary financing prohibition if such financing is short-term, addresses urgent situations, systemic stability issues are at stake and decisions are made in the NCB’s discretion. To this end, inserting references to Article 123 of the Treaty in national legislation should be considered. When exercising its discretion to grant a loan, the NCB must ensure that it is not in effect taking over a government task. In particular, central bank support for deposit guarantee schemes should not amount to a systematic ‘pre-funding’ operation . 3.1.3 The ECB notes that the condition that the temporary loan or other repayable financial assistance provided by ČNB must address an urgent situation is not expressly contained in the draft laws. Even if such funding is discretionary, temporary and in the interests of financial stability, it should be stipulated that the funding may be granted only in demonstrably urgent cases in order to be compatible with the monetary financing prohibition. 3.1.4 It is clear that the draft laws do not authorise ČNB to provide any loan or financing under any circumstance to the Resolution Fund. The provision of such financing to the Resolution Fund would constitute a government task, and any such loan or financing by ČNB would therefore breach the prohibition of monetary financing under the Treaty . 3.2 Conferral of resolution tasks on ČNB The draft law designates ČNB as the resolution authority, broadening its responsibilities to include placing obliged entities under resolution and taking resolution measures in respect of such entities . By virtue of this designation, ČNB carries out resolution tasks and exercises resolution powers. As emphasised above, carrying out these resolution tasks does not require ČNB to provide any financing to the Resolution Fund. In the light of the guidance set out in paragraph 2.3, it must be assessed carefully whether ČNB’s new tasks and responsibilities in this field could constitute a breach of the monetary financing prohibition. 3.2.1 New tasks The ECB notes that whilst ČNB has had for many years powerful tools to intervene in, and if necessary take control of distressed financial institutions which pose a risk to financial stability, principally in the form of the enforced administration regime, the draft law introduces specific, new resolution tools, such as bail-in and the bridge institution and asset management vehicle, which in

text: their proposed form do not currently exist in Czech law, as well as expanded ancillary powers which did not exist as separate resolution measures or powers in the past. The ECB notes that the draft laws introduce substantial legislative amendments to ČNB’s existing resolution-related tasks that are currently categorised as central banking tasks and should therefore be assessed in the light of the monetary financing prohibition. 3.2.2 Principle of financial independence The principle of financial independence requires NCBs to have sufficient means to carry out not only their ESCB-related tasks from an operational and financial point of view, but also their national tasks . In this regard the ECB notes that the draft law authorises ČNB to recover its expenses and costs demonstrably incurred in carrying out resolution measures from the institutions concerned by such measures . The ECB welcomes the provisions of the draft law concerning the financing of ČNB’s new resolution tasks. Furthermore, the ECB notes that ČNB’s Board is required, before deciding to take a resolution measure, to obtain the prior approval of the MoF in a broad range of circumstances, often when the realisation of the measure would require the use of public funds or if the use of such funds would become more likely due to substantial outflows from the Scheme or the Resolution Fund . It is important that ČNB’s Board, as the decision-making body responsible for performing ČNB’s ESCB-related tasks, should have ultimate control over any decision related to a resolution matter that could affect ČNB’s financial independence . 3.2.3 Links to tasks listed in

text: Article 127(2)

text: , (5) and (6) of the Treaty Administrative resolution tasks are considered tasks related to the tasks referred to in Article 127(5) of the Treaty, based on the understanding that administrative resolution tasks and supervisory tasks complement each other, particularly where an NCB has a mandate for the stability of the financial system or where, as in this case, the designated resolution authority already carries out integrated supervision of the financial markets. 3.2.4 Atypical tasks A number of Member States have conferred on their NCBs a significant role in the resolution of financial institutions, whether as the resolution authority or as a competent authority in the decision-making process for resolution. The ECB has generally welcomed the allocation of such tasks to NCBs provided they do not interfere financially and operationally with the performance of the NCB’s ESCB-related tasks . The resolution tasks of an NCB can therefore be regarded as being tasks not atypical of a central bank, particularly if, as in the case of ČNB, it has a longestablished statutory responsibility for financial stability .

text: 3.2.5 Discharge of tasks on behalf of and in the exclusive interest of the Government or of other public

text: entities

text: Whilst ČNB is designated as the sole resolution authority and takes resolution measures acting as an administrative authority in the exercise of public functions in its own name, and not on behalf of any other authority, as noted in paragraph 3.2.2 above, ČNB’s Board is required in some cases, before deciding to take a resolution measure, to obtain the prior approval of the MoF. ČNB also has to closely cooperate with the MoF in its resolution role. There is no indication that in discharging its resolution function ČNB acts exclusively in the interests of the MoF or another public entity. 3.2.6 Extent to which conflicts of interests with existing ČNB tasks are addressed 36 37 3.2.6.1 The ECB has repeatedly noted that, in line with the BRRD , staff involved in carrying out the functions of a resolution authority in accordance with the Directive must be structurally separate and subject to separate reporting lines from the staff involved in carrying out prudential banking supervision tasks pursuant to applicable EU legal acts or with regard to the other functions of the relevant authority. The ECB observes that the BRRD ‘exceptionally’ allows one authority to carry out both resolution and supervisory functions on the condition that adequate structural arrangements are put in place in order to ensure operational independence and to avoid conflicts of interest between that authority’s resolution function and its other functions. For example, the BRRD envisages structural separation being achieved by keeping the reporting lines for staff involved in carrying out resolution tasks separate from those used by staff involved in supervision activities . 3.2.6.2 Pursuant to the draft law, ČNB is required to ensure the operational and organisational independence of the department carrying out resolution functions and its staff to ensure there is no conflict of interest and to provide for the separation of tasks relating to the resolution function from ČNB’s other tasks . The draft law states that ČNB, as resolution authority, will apply crisis resolution measures ‘separately from its other tasks’. These provisions aim to ensure that: (a) under the future regime there is a separation of resolution and supervision functions within a single resolution and supervision authority, and (b) the resolution function will have equal access to any necessary information available to the supervisory function, and vice versa. Furthermore, within ČNB, the Board, rather than the head of the resolution unit, will take all significant resolution decisions where either public funds or systemic risk are involved, with the exception of the exercise of the government stabilisation tool. The ECB welcomes these provisions, as they appear to adequately address potential conflicts of interests between resolution and ČNB’s other

text: tasks and functions. The ECB would be interested in being provided in advance, for information, the future internal rules implementing these provisions. 3.2.7 Extent to which the performance of tasks is proportionate to ČNB’s financial and operational capacity and its ability to perform its ESCB-related tasks. As noted above, in order to remain financially independent, NCBs must have sufficient means to carry out not only their ESCB-related tasks from an operational and financial point of view, but also their national tasks. In this regard the ECB welcomes the fact that ČNB may recover the expenses incurred in carrying out resolution measures from the institutions concerned. The ECB notes, however, that the administrative start-up and operational costs of the resolution unit will be borne by ČNB’s own budget. 3.2.8 Extent to which the performance of tasks fits into ČNB’s institutional set-up in the light of central

text: As noted above, in a broad range of circumstances, typically when public funds are required, ČNB may only apply a resolution measure or order a capital write-down or debt conversion upon the prior approval of the MoF. ČNB has a duty to closely cooperate with the MoF, particularly in the foregoing cases, and it is generally required to grant the MoF and its duly-authorised employees access to all documents and information relating to resolution measures or a writedown of capital instruments . The ECB considers that the broadened resolution tasks that ČNB will assume under the draft law entail much closer cooperation with the MoF when fiscal funds are at stake than for the exercise of its supervisory or other functions. 3.2.9 Extent to which the performance of tasks harbours substantial financial risks 3.2.9.1 The draft laws do not contain provisions excluding or limiting the liability of ČNB as resolution authority for any negligent act or omission or other breach of any legal obligation when applying the resolution tools or exercising resolution powers. This is in marked contrast to the explicit exclusion of liability of publicly-owned resolution vehicles – for example, the bridge institution – for any damage to shareholders or creditors of the obliged entity resulting from the application of crisis resolution measures. 3.2.9.2 The ECB understands that the State is primarily liable for any damage caused by an unlawful decision or improper administrative action by a legal entity or person in the course of exercising public authority on the State’s behalf. The carrying out of resolution and supervision functions clearly constitutes the exercise of a public authority. For this purpose the entity or person exercising public authority in this situation could be the State (or any organisational unit of the State), ČNB, or any other person provided it has separate legal personality. 3.2.9.3 Furthermore, the ECB understands that ČNB shall indemnify the MoF where the State is held liable for any breach of ČNB’s legal obligations when applying the resolution framework . The ECB understands that this right of indemnification would apply even if ČNB had obtained prior

text: approval from the MoF for the improper resolution measure, in which case the MoF will de facto (if not de jure) operate as a joint resolution authority alongside ČNB. Against this backdrop, the ECB notes that, under the prohibition of monetary financing laid down in the Treaty, national legislation may not require an NCB to finance the public sector’s obligations vis-à-vis third parties . The ECB understands that as a matter of Czech law the liability of ČNB for breaches of obligations under the resolution framework and to indemnify the MoF would only extend to its own administrative acts. The ECB considers that it would be useful to explicitly clarify this point in the draft laws, given that potential liability issues represent substantial financial risks for ČNB. 3.2.10 Conclusion The ECB considers that there are grounds for regarding ČNB’s expanded resolution tasks as central banking tasks, in the sense that they complement ČNB’s existing supervisory functions. The fact that ČNB will be authorised to recover its resolution-related expenses from the institutions concerned should also contain the impact on its financial capacity of assuming those tasks, whilst the start-up and running costs will be absorbed by ČNB’s budget. However, the ECB considers that the draft laws potentially create significant financial risks for ČNB because they do not limit its liability as the resolution authority for negligent or improper acts. Also, it would be useful to explicitly clarify that ČNB’s obligation (under current state liability law) to indemnify the MoF for any damages and costs the State has to pay to third parties extends only to its own administrative acts. Moreover, it is not obvious why ČNB should assume the sole burden of those potential liabilities when the draft law requires ČNB to obtain prior approval from the MoF before taking resolution actions in a broad range of circumstances. 3.3 The MoF’s role in resolutions In requiring ČNB as the resolution authority to obtain the MoF’s prior approval before taking resolution actions in a broad range of circumstances, the question arises whether the MoF may be considered to be a second resolution authority alongside ČNB. The consulting authority is invited to consider if its prior approval is more appropriately limited to exceptional cases in which the resolution measures have a direct fiscal impact or systemic implications, in order to avoid it de facto operating as a joint resolution authority alongside ČNB, which would require the MoF to ensure operational independence of its resolution function. 3.4 Resolution planning The draft law stipulates that resolution plans must neither assume the granting of emergency liquidity assistance by ČNB as the central bank nor the use of public resources except the use of the resources of the Resolution Fund and the Scheme . It also provides that recovery plans must not assume the granting of public support or rely on granting of loans or entry into other transactions by the obliged entity preparing the plan with ČNB . While these provisions appear to be in line with the requirements of the BRRD, the ECB emphasises that they do not in any way affect the competence of central banks to decide independently and in their full discretion on the provision of central bank liquidity to solvent institutions, both through standard monetary policy

text: operations and emergency liquidity assistance, within the limits imposed by the monetary financing prohibition under the Treaty . 3.5 Comparative status of ČNB’s preferential and secured claims in insolvency Finally, regarding the provisions of the draft law on preferential claims of ČNB in respect of loans provided to institutions and other obliged entities as well as claims arising from expenses properly incurred by ČNB in carrying out resolution tasks , the ECB would invite the consulting authority to consider further amending the draft law, as well as the Law on Insolvency, in order to comprehensively clarify the status and ranking of preferential unsecured claims of ČNB in the insolvency of an obliged entity, also in relation to the unsecured claims of other creditors.

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

text: Done at Frankfurt am Main, 1 July 2015.

text: [signed]

text: The President of the ECB

text: Mario DRAGHI