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: Meldeverordnung ZABIL 1/2013 der OeNB betreffend die statistische Erfassung des grenzüberschreitenden Kapitalverkehrs (ZABIL 1/2013).

text: Regulation (EU) No 575/2013

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

text: Regulation (EU) No 648/2012

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

text: Verordnung der OeNB betreffend statistische Erhebungen über die Importe und Exporte von Dienstleistungen und grenzüberschreitende Finanzbeziehungen (LSEZE 2008).

text: Meldeverordnung ZABIL 1/2012 der OeNB betreffend die statistische Erhebung des grenzüberschreitenden Dienstleistungsverkehrs (ZABIL 1/2012). See also Opinion

text: Guideline of the European Central Bank of 9 December 2011 on the statistical reporting requirements of the European Central Bank in the field of external statistics *OJ L 63. 3.3.2012, p. 1).

text: Available on the ECB’s website at www.ecb.europa.eu.

title: Opinion of the European Central Bank of 23 December 2015 on balance of payments and cross-border provision of services reporting (CON/2015/58)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 23 December 2015 on balance of payments and cross-border provision of services reporting (

text: ) Introduction and legal basis

text: On 23 November 2015 the European Central Bank (ECB) received a request from the Oesterreichische Nationalbank (the ‘OeNB’) for an opinion on a draft regulation on balance of payments reporting (the ‘draft balance of payments regulation’) and a draft regulation on the collection of statistics on import and export services (the ‘draft import/export regulation’, together with the draft balance of payments regulation, the ‘draft regulations’). 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 on the third and fourth indents of

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

text: , as the draft regulations relate to the OeNB and the collection of balance of payments statistics. In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.

text: 1. Purpose of the draft regulations

text: 1.1 The draft balance of payments regulation amends an existing reporting regulation on cross-border financial transactions. The areas in which businesses need to report data are cross-border direct investments, portfolio investments, other cross-border investments, cross-border real estate transactions and capital transfers and cross-border transactions in financial derivatives. The statistics based on data collected under the existing regulation demonstrate how Austrian businesses have been doing foreign trade over the past years and are also used for monetary and economic policy purposes. The draft balance of payments regulation aims to reduce businesses’ reporting burden by providing changes to the content of what must be reported, as well as the reporting procedures. In particular, the draft bop regulation revises several reporting templates, introduces references to

text: Regulation (EU) No 575/2013

text: and clarifies certain reporting requirements. Furthermore, certain data are no longer required, such as genuine securities sale and repurchase agreements, securities lending agreements and account holder reports.

text: 1.2 The draft import/export regulation replaces an existing reporting regulation . It provides the legal basis for the collection of additional data carried out as part of structural business statistics activities and takes into account that the current focus is on cross-border imports and exports to and from non-Union countries. The following services are included: • remuneration for contract processing services; • maintenance and repair services not elsewhere classified; • transport services; • construction services; • insurance services; • expressly charged financial services; • fees for the use of intellectual property not elsewhere classified; • telecommunications; • IT and information services; • research and development services; • professional services and business and other management consultancy services; • technical services; • waste treatment and cleaning services; • services in the agricultural, forestry and fishery sectors; • services in mining and oil and gas extraction; • operational leasing; • commercial services; • other corporate services not elsewhere classified; • personal services; • culture and leisure services as well as transit trade transactions (buying-in and selling). These data are used for compiling the balance of payments. The results will also be used in the revision of another reporting regulation . The draft import/export regulation introduces revised questions for the additional collection of data on imports and exports. Furthermore, it introduces an electronic reporting standard. The collection of data under the draft import/export regulation is carried out as a one-off collection within Statistics Austria’s collection of 2015 structural business statistics. In order to avoid any additional reporting burden, the draft import/export regulation only applies to businesses that receive access rights from Statistics Austria and that are not subject to another existing reporting regulation .

text: 2. General observations

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

text: 3. Specific observations

text: 3.1 Draft balance of payments regulation The ECB welcomes the proposed changes to content and procedures envisaged for the reports on portfolio investments, direct investments, financial derivatives and other investments, especially in relation to the following aspects: (a) removal of redundant data requirements, which will reduce the reporting burden on respondents; (b) providing explanations in greater detail, which will aid in understanding and avoiding duplication of reports; and (c) updating definitions and/or making references to ECB/Union legislation, which will improve consistency. 3.2 Draft import/export regulation The ECB welcomes the proposed new one-off survey, which aims to collect information on new requirements, i.e. for data with a regional focus without any additional reporting burden on businesses, and which will be carried out using a nationally standardised electronic data form, which would assist in more timely and accurate reporting.

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

text: Done at Frankfurt am Main, 23 December 2015.

text: [signed]

text: The President of the ECB

text: Mario DRAGHI


text: Following amendments, the draft law was adopted by the lower chamber of the Polish Parliament on 29 December 2015 and sent to the upper chamber. The upper chamber adopted further amendments on 31 December 2015. The ECB has adopted its opinion based on the draft law sent for consultation, also taking into account the amendments introduced by the lower and upper chambers of the Polish Parliament.

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: The ‘European single passport’ is a system that allows financial services operators legally established in one Member State to establish/provide their services in the other Member States without further authorisation requirements.

text: These own funds are defined under

text: Article 4(1)

text: (118) of

text: Regulation (EU) No 575/2013

text: Regulation (EU) No 648/2012

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

text: See paragraph 3.1.1 of Opinion

text: , paragraph 2.1 of Opinion

text: , paragraph 2.1 of Opinion

text: and paragraph 3.2.1 of Opinion

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

text: See paragraph 3.1.1 of Opinion

text: , paragraph 2.1 of Opinion

text: and paragraph 3.2.2 of Opinion

text: See paragraph 2.2 of Opinion

text: , paragraph 2.2 of Opinion

text: and paragraph 3.2.2 of Opinion

publisher: Europeiska centralbanken

sprak: en

title: Opinion of the European Central Bank of 12 January 2016 on a tax for certain financial institutions (CON/2016/1)

serie: con

text: OPINION OF THE EUROPEAN CENTRAL BANK of 12 January 2016 on a tax for certain financial institutions (

text: ) Introduction and legal basis

type: rubrik

text: On 15 December 2015 the European Central Bank (ECB) received a request from the Polish Parliament for an opinion on a draft law establishing a tax on certain financial institutions (hereinafter the ‘draft law’) . The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the Functioning of the European Union and the sixth indent of

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

type: stycke

text: 1. Purpose of the draft law

text: 1.1 The draft law imposes an obligation on certain financial and insurance institutions to pay a special monthly levy of 0.0366% on the value of an institution’s assets, subject to certain exemptions, thresholds and deductions (hereinafter: the ‘tax’). According to the explanatory memorandum, the tax is aimed at creating an additional source of funding for public expenditure and at increasing the contribution made by the financial sector for funding public expenditure, in particular social security, as set out in the Polish Government’s spending programme. 1.2 Under the draft law, the tax applies to: (a) domestic banks; (b) branches of foreign banks; (c) branches of Union credit institutions; (d) cooperative savings and loan unions; (e) domestic insurers; (f) domestic reinsurers; (g) branches of foreign insurers and reinsurers; (h) consumer credit institutions. 1.3 Under the draft law, the tax will not apply to: (a) state-owned banks; (b) tax payers that are subject to a supervisory decision; and (c) tax payers implementing a restructuring programme. In addition, according to the explanatory memorandum, the tax will not apply to: (a) credit institutions located in the Union that carry out banking activities on a cross-border basis under the ‘European single

text: passport ’; and (b) insurance companies located in the Union carrying out insurance activities other than through a branch. 1.4 Subject to exemptions, the tax base will comprise the value of the assets at the end of each month exceeding a threshold in the amount of: (a) PLN 4 billion for banks and cooperative savings and loan unions; (b) PLN 2 billion for insurers and reinsurers; and (c) PLN 200 million for consumer credit institutions. 1.5 The draft law provides that the tax base will be reduced: (a) for domestic banks and branches, by the value of: (i) own funds referred to in Article 126 of the Law on Banking ; and (ii) the assets acquired by the taxpayer from Narodowy Bank Polski (NBP) and securing refinancing credit provided by the NBP to a credit institution; (b) for cooperative savings and loan unions, by the value of own funds referred to in Article 24 of the Law on cooperative savings and loan unions; (c) for domestic banks, branches and cooperative savings and loan unions, by the value of: (i) the increase in own funds following a supervisory decision; and (ii) assets held in the form of Treasury bonds; (d) for domestic banks that are affiliating banks within the meaning of Article 2(2) of the Law on the functioning of cooperative banks, by the value of all funds accumulated on all accounts of the affiliated cooperative banks. 1.6 The draft law also provides that if the tax base is denominated in a foreign currency, the conversion into PLN will be performed on the basis of an average exchange rate published by the NBP on the last business day prior to the date on which the tax base is determined. 1.7 The tax will not be a deductible cost. Additionally, institutions may not use the tax as a basis for altering any terms on which their financial and insurance services are provided that are included in contracts existing prior to the entry into force of the draft law.

text: 2. General observations

text: 2.1 Unlike in most Member States that have introduced a bank levy, the proposed tax is not linked with specific risks stemming from the financial sector, nor does it relate to former public support to the financial sector. Rather, the proposed tax exclusively aims at increasing the amount of funds that are being contributed by the financial sector for financing public expenditure. In this context, the ECB has consistently advised that taxes on financial institutions should be considered in relation to the dual objective of: (a) ensuring a more equitable distribution of the costs arising from their potential failure between taxpayers and the financial sector; and (b) addressing the risks that they

text: pose . Imposing any ad hoc taxes on banks for general budgetary purposes should be preceded by a thorough analysis of potential negative consequences for the banking sector to ensure that such taxes do not pose risks to financial stability and the provision of credit, which could eventually adversely affect growth in the real economy. Such an effect might result in banks offering less favourable terms to their customers when providing loans and other services, and may also induce certain banks to cut back on their activities, leading to a reduction in the availability of credit and creating uncertainty for these banks . 2.2 The introduction of the tax should be carefully considered with regard to its impact on the profitability of affected financial institutions, their capital adequacy and resilience to adverse shocks and, more generally, its impact on financial stability, credit growth and the economy generally. In this context, the differences in the situation of individual banks need to be taken into account, together with the impact of other regulations being introduced in Poland and the Union. In particular, the situation of weaker banks that may record losses as a result of the proposed tax should be fully analysed. 2.3 The proposed tax’s structure may give financial institutions an incentive to change their risk profile by restructuring their portfolios in favour of riskier products, by making use of off-balance sheet activities and/or by transferring their assets abroad. 2.4 In the light of the foregoing, and in line with its previous opinions , the ECB invites the consulting authority to consider whether it would be advisable to undertake a comprehensive impact assessment of the proposed tax.

text: 3. Specific observations

text: 3.1 Definition of ‘tax base’ The current definition of ‘tax base’ in Article 5 of the draft law is unclear and may therefore create an incentive for banks to reduce the size of their balance sheet in order to reduce their tax obligation. In the case of an increase in assets resulting from intra-group unsecured funding, the corresponding assets should not be taxed twice within the same financial group, since this could have an adverse effect on the intra-group funding needs of credit institutions. 3.2 Harmonisation of fiscal policies The development of a harmonised, consistent and transparent approach to special taxation of the financial sector is necessary to achieve the overall objective of preserving a level playing field, while limiting distortions to competition, and ensuring that financial stability is equally safeguarded. This is particularly important in the Union, where the introduction of different bank levy schemes

text: could potentially undermine the process of financial integration by introducing elements of fiscal, regulatory and supervisory fragmentation. This opinion will be published on the ECB’s website. Done at Frankfurt am Main, 12 January 2016. [signed]

text: The President of the ECB

text: Mario DRAGHI

type: vagledning

utgivare: ecb


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

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

text: Regulation (EU) No 1210/2010

text: of the European Parliament and of the Council of 15 December 2010 concerning authentication of euro coins and handling of euro coins unfit for circulation (OJ L 339, 22.12.2010, p. 1).

text: Decision ECB/2010/14 of the European Central Bank of 16 September 2010 on the authenticity and fitness checking and recirculation of euro banknotes (OJ L 267, 9.10.2010, p. 1).

text: Resolution No 03-162 of the Board of Lietuvos bankas of 16 September 2014 on the procedures for authenticity and fitness checking and recirculation of euro banknotes and coins (Register of Legal Acts, 22 September 2014, No 2014-12683).

text: See Opinion

title: Opinion of the European Central Bank of 20 January 2016 on supervision of activities of cash handlers and imposition of administrative measures and penalties (CON/2016/2)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 20 January 2016 on supervision of activities of cash handlers and imposition of administrative measures and penalties (

text: ) Introduction and legal basis

text: On 30 November 2015 the European Central Bank (ECB) received a request from the Lithuanian Ministry of Finance for an opinion on a draft law amending and supplementing the Law on Lietuvos bankas (hereinafter the ‘draft law’). The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the Functioning of the European Union and the first, second and third indents of

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

text: , as the draft law relates to currency matters, means of payment and Lietuvos bankas. In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.

text: 1. Purpose of the draft law

text: 1.1. The requirements of

text: Council Regulation (EC) No 1338/2001

text: Regulation (EU) No 1210/2010

text: of the European Parliament and of the Council , and Decision ECB/2010/14 of the European Central Bank have been partially implemented in Lithuania by Resolution No 03-162 of the Board of Lietuvos bankas setting out procedures for authenticity and fitness checking and recirculation of euro banknotes and coins . 1.2. The main objective of the draft law is to further implement the requirements of the above mentioned Union legal acts. To this end, the draft law (a) clarifies the rights and obligations of Lietuvos bankas in supervising how cash handlers fulfil the requirements for the authenticity and fitness checking and recirculation of euro banknotes and coins, and (b) lays down measures ensuring that breaches of these requirements are subject to effective, proportionate and deterrent sanctions.

text: 1.3. The draft law introduces a specific sanctioning regime for persons committing infringements. In accordance with Article 47 (6) of the draft law, Lietuvos bankas has the right to impose administrative fines amounting to a maximum of 10 % of total annual income in the case of legal persons and EUR 50,000 in the case of natural persons.

text: 2. General observations

text: 2.1. The ECB notes that it has previously been consulted by Lietuvos bankas on Resolution No 03-162 of the Board of Lietuvos bankas when it was at draft stage . Some of the ECB’s remarks previously expressed in its opinion given in response to that consultation are also applicable to the draft law. 2.2. The ECB considers it essential that any draft legislation should uphold the principle of the primacy and direct application of Union law on the authentication of euro banknotes and coins and the handling of euro banknotes and coins unfit for circulation. For consistency’s sake, the ECB favours the use in national legislation of direct references to

text: Regulation (EC) No 1338/2001

text: Regulation (EU) No 1210/2010

text: and Decision ECB/2010/14 or, alternatively, the reproduction of their provisions without any alterations or additions . 2.3. In its previous opinion the ECB noted that the national regime for sanctions and reporting did not fully reflect

text: Regulation (EC) No 1338/2001

text: and Decision ECB/2010/14 as regards the range of sanctions that may be imposed for failing to carry out authenticity and fitness checking of euro banknotes and coins prior to circulation. In addition, the ECB noted that Lithuanian legislation did not provide for the imposition of administrative penalties (fines) on legal entities. 2.4. The ECB welcomes the draft law, which takes into account those observations and establishes a deterrent sanctions regime for non-compliant cash handlers. The ECB is confident that the provisions of the draft law will support the protection of euro banknotes and coins in circulation and thereby maintain the general public’s confidence in euro banknotes and coins. 2.5. The ECB believes that the sanctioning regimes available in the Member States that have aligned their law with

text: Regulation (EC) No 1338/2001

text: in conjunction with Decision ECB/2010/14 may benefit from harmonisation insofar as the procedures laid down by the ECB in that Decision are equally applicable to all cash handlers located in the euro area . In this respect, the ECB considers it important for national authorities to contribute to the establishment of a level playing field among cash handlers falling within the scope of

text: Regulation (EC) 1338/2001

text: , without prejudice to (a) the particularities of the cash cycle and the organisation of cash handlers at national level, and (b) the consistency of the levels of financial penalties available in their legal systems.

text: 3. Specific observations

text: 3.1. Under the draft law, when non-compliance by a cash handler with relevant Union acts, including ECB legal acts, or the provisions of the draft law, is detected, Lietuvos bankas may, among other things, prohibit a cash handler from recirculating euro banknote denominations of the series concerned until such non-compliance is rectified . The ECB reiterates that when Lietuvos bankas prohibits recirculation in such a situation, it does so on behalf of the ECB . 3.2. To ensure that fines have a deterrent effect, the maximum amount of a fine should be a sum which effectively deters cash handlers from breaching their obligations . In this respect, the ECB welcomes the provision of the draft law which grants the right to Lietuvos bankas, notwithstanding the maximum fines set out in the draft law, to impose a fine of up to the double the amount of any illegal income, other financial benefits, evaded losses or damage caused due to the infringement in question.

text: Done at Frankfurt am Main, 20 January 2016.

text: [signed]

text: The President of the ECB

text: Mario DRAGHI


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: 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). 3 The reference is to Law 3746/2009 (Official Government Gazette, Part A, 27), as amended, inter alia by laws 4021/2011 (Official Government Gazette, Part A, 218) and Law 4051/2012 (Official Government Gazette, Part A, 40). 4 See Article 4(1) of the draft law. 5 See Article 4(2) of the draft law. This requirement: (a) provides compensation to depositors in the event that their bank is unable to repay their deposits; (b) provides compensation to investors/customers of credit institutions in the event that their bank is unable to fulfil its obligations to them, and (c) finances bank resolution measures.

text: See Article 4(3) of the draft law. 7 See Article 48(1) of the draft law. On the BoG’s role in the governance of the HDGIF, see paragraph 4.2 of Opinion

text: . All ECB opinions are available on the ECB’s website at www.ecb.europa.eu. 8 See

text: Article 6(2) of Directive 2014/49/EU

text: and Article 9(2) of the draft law. 9 See

text: Article 8(1) of Directive 2014/49/EU

text: and Article 11 of the draft law. 10 See

text: Article 9(1) of Directive 2014/49/EU

text: and Article 21 of the draft law. 11 See

text: Article 16 of Directive 2014/49/EU

text: and Article 46 of the draft law.

text: See the ECB’s 2014 Convergence Report, p. 30, available on the ECB’s website at www.ecb.europa.eu. See also paragraph 3.2 of Opinion

text: ; paragraph 4.1 of Opinion

text: ; paragraph 2.2 of Opinion

text: ; and paragraph 3.1.3 of Opinion

text: . 13 Under the currently applicable legal regime, the BoG is responsible for allocating credit institutions to one of the several statutory bands, on the basis of which annual contributions are calculated, taking into account all relevant prudential supervisory criteria.

title: Opinion of the European Central Bank of 21 January 2016 on the deposit guarantee scheme (CON/2016/3)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 21 January 2016 on the deposit guarantee scheme (

text: ) Introduction and legal basis

text: On 8 January 2016 the European Central Bank (ECB) received a request from the Minister of Finance of the Hellenic Republic for an opinion on a draft law on the Deposit and Investment Guarantee Scheme (hereinafter the ‘draft law’), which transposes into Greek law Directive

text: of the European Parliament and of the Council . 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 it relates to the Bank of Greece (BoG) and to rules applicable to financial institutions insofar as they materially influence the stability of financial institutions and markets. In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.

text: 1. Purpose and overview of the draft law

text: 1.1 The main purpose of the draft law is to recast and update the national legal framework governing the establishment and operation of the Hellenic Deposit and Investment Guarantee Fund (hereinafter ‘HDIGF’), by bringing it in line with Directive

text: . Once the draft law enters into force, the current national legal framework on the establishment and operation of the HDIGF will be automatically repealed, and several of the core provisions will be incorporated into the draft law. 1.2 Under the draft law, the HDIGF is to continue to operate as a private law legal entity, owned by the participating credit institutions and supervised by the Ministry of Finance of the Hellenic Republic while its tasks will remain the same . Additionally, the HDIGF is to continue to comprise three separate schemes: (a) a deposit cover scheme, for the protection of depositors; (b) an investment cover scheme, for the protection of investors; and (c) a resolution scheme, for the financing of

text: resolution measures, the assets of which are distinct . With regard to its governance structure, the HDIGF is to continue being governed by a seven-member Board, appointed by the Minister of Finance of the Hellenic Republic, comprising a Chairperson, to be selected from amongst the BoG’s Deputy Governors, and six other members, nominated by the Ministry of Finance (one member), the BoG (three members), and the Hellenic Bank Association (two members) . 1.3 It follows from Article 25 of the draft law that the assets of the HDGIF’s deposit cover scheme comprise (i) the regular, extraordinary and initial contributions payable by participating credit institutions; (ii) the HDGIF’s registered capital; and (iii) revenues from other sources, such as the management of its cash reserves, the recovery or liquidation of its claims and donations. It also follows from Article 29 of the draft law that, should the funds available to the HDGIF’s deposit cover scheme not suffice to cover depositor compensation claims, the HDIGF Board may decide (a) to borrow the necessary funds, whether from the participating credit institutions or from other sources, with or without a State guarantee and subject to terms and conditions stipulated by way of a decision of the HDGIF Board, or (b) otherwise borrow the necessary funds, so as to put the HDGIF in a position where it can ensure the short-term financing of its obligations. 1.4 Following the example of the Directive

text: , the adoption of the draft law will mark a departure from the current situation as regards deposit guarantee schemes, particularly in relation to: (a) the temporary protection of certain deposits in excess of the EUR 100 000 harmonised level of coverage provided for in Directive

text: ; (b) the reduction of the period necessary for the repayment of deposits from twenty to seven working days ; (c) the recognition of an actionable right to compensation, to be exercised directly by depositors against the HDIGF ; and (d) the introduction of a legal duty for credit institutions to provide depositors (and investors) with all relevant information with regard to the protection extended to their deposits and/or investments by the HDIGF .

text: 2. General observations

text: 2.1 The ECB welcomes the draft law, which codifies the legal framework governing the establishment and operation of the HDIGF. 2.2 At the same time, the ECB stresses that it does not opine on whether or not the draft law effectively discharges the obligations of the Hellenic Republic to implement Directive

text: . Rather, the ECB focuses on those provisions that may affect the BoG’s role as a member of the European System of Central Banks (ESCB) as well as on the likely implications of specific provisions of the draft law on the ECB’s supervision of significant institutions and the preservation of financial stability in the Hellenic Republic.

text: 3. Specific observations

text: 3.1 No provision of liquidity from the BoG to the HDIGF The ECB understands that there is nothing in the draft law that would expressly permit the BoG to provide liquidity to the HDIGF.

text: Articles 25

text: to 29 of the draft law, which set out the sources for the financing of the tasks of the deposit cover scheme of the HDIGF, do not explicitly refer to the BoG’s involvement in the provision of liquidity to the HDGIF. As the ECB has repeatedly stated in the past, any national legislation that provides for a deposit guarantee scheme to be financed by an ESCB national central bank (NCB) would only be compatible with the monetary financing prohibition under Article 123 of the Treaty where certain restrictive conditions are met, i.e. such financing is short-term, it addresses urgent situations, systemic stability issues are at stake and decisions are made at the NCB’s discretion . The ECB expects these conditions to be fulfilled with regard to any potential involvement by the BoG in the short-term financing arrangements of the HDGIF, by way of the provision of loans by the BoG, as per

text: Articles 29 (1)

text: or (2) of the draft law. 3.2 Role of the BoG in the operation of the HDIGF Under Article 27(4) of the draft law, which corresponds to

text: Article 13(2) of Directive 2014/49/EU

text: , the Board makes a recommendation on the type of methodology to use in calculating regular contributions to the HDIGF, after which a BoG decision will be taken, then notified to the Ministry of Finance of the Hellenic Republic. The ECB is satisfied that the BoG’s responsibilities under the aforementioned provision of the draft law do not materially differ from the BoG’s responsibilities under

text: Articles 4(4)

text: (a) and (b)(ii) of Law 3746/2009 on the establishment and operation of the current HDIGF . It follows that the draft law does not, in the ECB’s view, confer genuinely new tasks on BoG in connection with the operation of the HDIGF. 3.3 Temporary protection of deposits in excess of the Union-wide harmonised level of coverage As noted in paragraph 1.4 of this opinion, Article 9(2) of the draft law allows certain deposits in excess of EUR 100 000 to be protected temporarily. In particular, the aforementioned provision states that certain deposits falling within the broad categories identified in

text: Article 6(2) of Directive 2014/49/EU

text: are to be protected up to an additional margin of EUR 300 000 for up to six months after the relevant amount has been credited to the relevant account, subject to the submission of an ex post application to the HDIGF by the account holder(s). The ECB understands that Article 9(2) of the draft law is the exercise of a national discretion under Article 6 of the Directive

text: . The ECB also notes that, according to the accompanying Explanatory Memorandum, the exercise of this discretion is not backed by additional contributions from the participating credit institutions. The ECB stresses the importance of ensuring that the financing capacity of the HDIGF is, at all times, proportionate to its liabilities, and expects that the

text: determination of the aforementioned additional margin of EUR 300 000 is the product of a prior impact assessment, to ensure that the HDIGF will be in a position to meet depositor and/or investor claims in the event of the insolvency of a credit institution holding protected deposits in excess of the Union-wide harmonised level of coverage. 3.4 Suspension of extraordinary contributions jeopardising the liquidity or solvency of a credit institution In order to safeguard the soundness of the capital base of credit institutions, the ECB welcomes Article 28(4) of the draft law, where it is stated that the BoG may suspend extraordinary contributions to the deposit cover scheme if these contributions would jeopardise the liquidity or solvency of a credit institution. Where significant institutions are concerned, this competence is, however, to be exercised by the ECB.

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

text: Done at Frankfurt am Main, 21 January 2016.

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: See the Annual Report 2014 of the Mint, p. 76.

text: Greece, Finland, Ireland, Luxembourg and Malta. In the Member States where the NCBs act as agents for their treasuries, the NCBs are reimbursed in full for the cost of minting and/or putting euro coins into circulation. 4 Cyprus, Estonia, Latvia, Lithuania and Slovakia. 5 See the ECB’s 2014 Convergence Report, p. 26, available on the ECB’s website at www.ecb.europa.eu.

text: See Opinion

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

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

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

text: and

text: b (1) of the Treaty (OJ L 332, 31.12.1993, p. 1). See also Opinion

title: Opinion of the European Central Bank of 25 January 2016 on safeguarding the redemption of coins by the Austrian Mint (CON/2016/4)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 25 January 2016 on safeguarding the redemption of coins by the Austrian Mint (

text: ) Introduction and legal basis

text: On 23 December 2015 the European Central Bank (ECB) received a request from the Austrian Ministry of Finance for an opinion on a draft law amending the Federal Act of 1988 on coinage and the Federal Act on the upper limit of the State guarantee (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 on the first, second and third indents of

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

text: , as the draft law relates to currency matters, means of payment and a national central bank (NCB). 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 Under the Act on coinage, only the Austrian Mint is entitled to mint and issue euro and cent coins in Austria. The Mint was established as a wholly-owned subsidiary of the Oesterreichische Nationalbank (OeNB) in 1989. The Mint emerged from the conversion by the State of the former Austrian Principal Mint Authority, which formed part of the State, into the Mint against payment of ATS (Austrian schilling) 8 billion by the OeNB. This structure was chosen to put the entire monetary policy, including the mint policy, in the OeNB’s hands. 1.2 The Mint is obliged to take back coins, convert them into banknotes, withdraw them if required by the Council pursuant to Article 128(2) of the Treaty, and replace damaged coins with new ones (hereinafter ‘redemption obligations’, based on Sections 8(4), 10, 11 and 14 of the Act on coinage). To date, the Mint has established revenue reserves of approximately EUR 437 million to be able to fulfil these redemption obligations. 1.3 An amendment to the Act on coinage in 2014, on which the ECB was not consulted, extended an existing prohibition on the Mint establishing provisions regarding its redemption obligations. It also limited the Mint’s ability to establish revenue reserves to 30% of the value of coins in circulation. It furthermore required the Mint to distribute 90% of its profits to its sole shareholder, the OeNB.

text: The ECB notes that due to this amendment the Mint was only allowed to account for revenue reserves of EUR 417.2 million, instead of EUR 510.6 million, for the financial year 2014, which would have been the appropriate reserves according to an expert opinion. Hence, there was an underfunding in the euro coin sector of the Mint amounting to EUR 93.4 million as at 31 December 2014 . 1.4 The draft law adds a prohibition on establishing provisions regarding the obligations pursuant to Section 14 of the Act on coinage. It also prohibits the Mint from establishing revenue reserves to meet its redemption obligations. Furthermore, it requires the liquidation of the existing revenue reserves. Thus, it is expected that the Mint’s existing revenue reserves will be dissolved and distributed to the OeNB. According to the explanatory memorandum to the draft law, this approach of prohibiting and liquidating revenue reserves for redemption obligations is aimed at avoiding excessive committed funds and associated investment risks within the Mint. The ECB understands that after the Mint has distributed these funds to the OeNB, the latter will include them in its own annual accounts and distribute any profit in accordance with the National Bank Act 1984 (hereinafter the ‘NBG’). In accordance with Section 69 of the NBG, after deducting certain earnings and allocating up to 10% of the remaining annual profit to the pension reserve until it is adequately funded, the State shall receive 90% of the OeNB’s remaining profit. The rest may be partly paid out as a dividend and partly as decided by the General Meeting of the OeNB. The ECB understands that, in connection with producing its annual accounts, the OeNB needs to take into account potential financial risks, in particular its obligation to exchange banknotes against fractional coins, fractional coins against other fractional coins and fractional coins against banknotes (see Section 62(3) of the NBG). 1.5 To safeguard the satisfaction of redemption obligations in the future, the State will indemnify the Mint for relevant payments made by it provided they cannot be covered from the Mint’s revenues relating to the issuance of coins, taking into account the minting expenses and the proceeds from melting down the coins. According to the draft Section 3a(1) of the Act on coinage, the State will indemnify the Mint for redeeming all kinds of euro coins, whether issued by the Mint or another Member State. In this respect, the draft law limits the amount of indemnification to the value of the amount of coins in circulation that were minted by the Mint. The ECB understands that the Mint will request indemnification once a year after the end of the previous calendar year. For this purpose, the draft law requires the Mint and the Minister of Finance to conclude an agreement within three months after the publication of the adopted law in the Official Gazette. 1.6 The draft law also authorises the Minister of Finance to make payments to the Mint up to a total amount of 30% of the value of coins in circulation during the year, if redemptions would otherwise demonstrably endanger the Mint’s existence. This provision only authorises the Minister of Finance to make such payments, but does not oblige the Minister to do so. Furthermore, this possibility is subject to the necessary authorisation of the Minister of Finance in the Act on Federal financing. To incorporate this new State guarantee into the State’s liability framework, the draft law increases the

text: State’s overall liability amount by EUR 2 billion in the Act on the upper limit of the State guarantee.

text: 2. General observations

text: 2.1 According to Article 128(2) of the Treaty, the right to issue euro coins rests with the Member States. Therefore, it is up to each euro area Member State to specify the legal issuer of the euro coins. In most euro area Member States issuance of euro coins is undertaken by the State. In five of those States the NCBs act as agents for their treasuries with regard to minting euro coins and 3 4 putting them into circulation . In five euro area Member States coin issuance is a competence of the NCB. 2.2 The Austrian situation is unique insofar as the issuing authority for coins is the Mint, a wholly owned subsidiary of the OeNB. In this respect, the concept of central bank independence, in particular financial independence, and the prohibition on monetary financing, as applicable to the OeNB, are also relevant as far as the Mint is concerned. Therefore, it has to be assessed whether any third party is able to exercise direct or indirect influence not only over an NCB’s tasks but also over its ability to fulfil its mandate in terms of having appropriate financial resources . In this respect, the ECB understands that the draft law’s indemnification scheme aims at ensuring that the Mint is adequately protected against the risk arising from the Mint’s redemption obligations. 2.3 In connection with the prohibition on the Mint establishing provisions relating to the obligations pursuant to Sections 8(4), 10, 11 and 14 of the Act on coinage, the ECB notes that, according to generally accepted accounting principles, an entity is required to establish provisions in respect of obligations of uncertain timing or amount. 2.4 The ECB understands that the OeNB needs to conduct a valuation of its participating interest in the Mint following the liquidation of the Mint’s revenue reserves and the transfer of its profit to the OeNB. 2.5 Furthermore, the ECB notes that the retroactive application of the draft law as of 31 December 2015 would have considerable implications for both the Mint’s and the OeNB’s annual accounts.

text: 3. Central bank independence and the prohibition on monetary financing

text: 3.1 Central bank independence 3.1.1 Article 130 of the Treaty lays down that financial independence is a key aspect of the principle of central bank independence for the members of the European System of Central Banks. The ECB emphasises that any task undertaken by the OeNB, including by the Mint as the OeNB’s wholly-

text: owned subsidiary, must be compatible with the OeNB’s institutional and financial independence, to safeguard the proper performance of its tasks under the Treaty and the Statute of the European System of Central Banks and of the European Central Bank (hereinafter the ‘Statute of the ESCB’), as well as its national tasks. The principle of central bank independence also requires, inter alia, that Member States do not put their NCBs, including their subsidiaries, in a position where they 6. have insufficient financial resources and inadequate net equity to carry out their tasks 3.1.2 While the draft law prohibits the Mint from establishing provisions and revenue reserves to meet its redemption obligations and requires the liquidation of the existing revenue reserves, the ECB understands that the transfer of the liquidated revenue reserve via the OeNB to the State as part of the OeNB’s profit distribution will be subject to the rules on profit allocation laid down in the NBG. The ECB also understands that the above-mentioned prohibitions are without prejudice to the OeNB’s ability to independently create and build up adequate financial buffers commensurate with the level of risks arising from its activities, including those performed through a wholly-owned subsidiary. 3.1.3 While the draft law provides that the State will indemnify the Mint for relevant payments made by it, provided they cannot be covered by the Mint’s revenues relating to the issuance of coins, and taking into account the minting expenses and the proceeds from melting down the coins, the ECB emphasises that any indemnification scheme has to ensure that the OeNB’s financial independence is not compromised. The OeNB must have at all times sufficient means to fulfil its tasks and, hence, any limitation of the indemnification must not lead to a situation in which the OeNB does not have sufficient means to fulfil its obligations. In this respect, the ECB understands that the draft law’s indemnification scheme aims at ensuring that the Mint is adequately protected against the risk arising from the Mint’s redemption obligations by extending the amount of indemnification to the value of the amount of coins brought into circulation that were minted by the Mint. 3.1.4 While – additionally and without prejudice to the Minster of Finance’s obligation to indemnify the Mint – the draft law enables the Minister of Finance to make immediate payments (up to a limited amount) to the Mint if redemption payments would otherwise endanger the Mint’s existence, it does not require the Minister to make such payments, which also depend on the necessary authorisation of the Minister in the Act on Federal financing. Accordingly, it is uncertain whether the Mint will receive the necessary financial support from the State if needed. Also in this context, the OeNB’s financial independence has to be preserved. In this respect, the ECB acknowledges that the indemnification arrangements under the draft law, including the increase in the State’s overall liability amount by EUR 2 billion, aim at supporting the financial position of the Mint and, thereby, the OeNB.

text: 3.2 Prohibition on monetary financing 3.2.1 The monetary financing prohibition is laid down in Article 123(1) of the Treaty and replicated in Article 21.1 of the Statute of the ESCB, and prohibits overdraft facilities or any other type of credit facility with the ECB or the NCBs in favour of Union institutions, bodies, offices or agencies, central governments, regional, local or other public authorities, other bodies governed by public law, or public undertakings of Member States. The precise scope of application of the monetary financing 7. prohibition is further clarified by

text: Council Regulation (EC) No 3603/93

text: 3.2.2 Against the specific historic background of the Mint, the issuance of euro coins by it has to be considered a State task for the purpose of assessing compliance with the monetary financing prohibition. The OeNB must be fully covered against any potential losses arising from the discharge of such a task. The ECB welcomes the fact that the Mint is entitled to keep the revenues related to the issuance of coins. However, the ECB understands that there is a risk of a loss by the Mint connected to its redemption obligations regarding all euro coins and not only those issued by the Mint. In view of the understanding that the Mint will request indemnification once a year, the agreement to be concluded between the Mint and the Ministry of Finance should provide for the indemnification to be paid in a timely manner and promptly after the establishment of a loss to ensure compliance with the monetary financing prohibition. The ECB understands that the possible immediate payments by the Government in cases where the Mint’s existence would otherwise be endangered aim at avoiding that any central bank money is used to cover any losses arising from the redemption obligations.

text: Done at Frankfurt am Main, 25 January 2016.

text: [signed]

text: The President of the ECB

text: Mario DRAGHI


title: Opinion of the European Central Bank of 1 February 2016 on the recovery and resolution of credit institutions and investment firms (CON/2016/5)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 1 February 2016 on the recovery and resolution of credit institutions and investment firms (

text: ) Introduction and legal basis

text: On 22 December 2015, the European Central Bank (ECB) received a request from the Cypriot Ministry of Finance for an opinion on three draft laws. The first relates to the resolution of credit institutions and investment firms (hereinafter the ‘draft Law on resolution’). The second concerns a draft law on the business of credit and other institutions (hereinafter the ‘draft Law on credit institutions’) and the third relates to a draft law on a deposit guarantee scheme and the resolution of credit and other institutions (the ‘draft Law on a deposit guarantee scheme’) (hereinafter collectively 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 and sixth indents of

text: , as the draft laws relate to the Central Bank of Cyprus (CBC) and rules applicable to financial institutions insofar as they materially influence the stability of financial institutions and markets. In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.

text: 1. Purpose of the draft laws

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

text: of the European Parliament and of the Council and some provisions of Directive

text: of the European Parliament and of the Council into Cypriot law, which will provide a new framework for the recovery and resolution of certain types of entities active in financial markets, including credit institutions, investment firms, and financial holding companies established in Cyprus. Such an implementation will ensure that Cypriot law is consistent with existing Union legislation in this field. The draft laws regulate the procedures to be applied by the authorities in relation to the recovery and resolution of credit and financial institutions at both individual and group level.

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 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: 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). 1.2 Cyprus had already established a comprehensive framework of this type in 2013, on which framework and its subsequent amendments the ECB had been consulted prior to Directive

text: and Directive

text: being adopted. After Directive

text: was adopted as the new European framework for the recovery and resolution of credit institutions and investment firms, it became necessary to replace some of the existing Cypriot legislation with a new framework that uniformly addresses all the issues associated with the potential failure of entities in the financial sector. Therefore, the draft laws propose to repeal two existing laws in this field, i.e. the Law on the resolution of credit and other institutions of 2013 and 2014 and the Law on the establishment and operation of a deposit protection and resolution of credit and other institutions scheme . According to the draft Law on resolution, all the resolution measures that are still in force, which were taken on the basis of the Law on the resolution of credit and other institutions of 2013 and 2014, will be considered as measures adopted on the basis of the draft Law on resolution upon its adoption, and will continue to be in force until they are completed, repealed or cancelled . 1.3 The CBC is the competent authority for the supervision of credit institutions in Cyprus and was designated as the national resolution authority for those institutions under the above legislative framework. Pursuant to the draft Law on resolution the CBC will be also designated as the resolution authority for investment firms, which are supervised by the Cyprus Securities and Exchange Commission. 1.4 The tools available to the CBC include preparatory measures, early intervention measures and the possibility to write down or convert capital instruments. The resolution tools may be applied, mutatis mutandis, to both credit institutions and investment firms.  Preparatory measures include recovery plans and group financial support agreements. Credit and financial institutions are required to draw up recovery plans, which are then reviewed and assessed by the CBC. The CBC may also require these recovery plans to be updated . The resolution authority for each institution that is not part of a group subject to consolidated supervision is responsible for drawing up resolution plans for these institutions. These institutions, as well as the groups themselves, are subject to resolvability assessments by the resolution authority.  Early intervention measures include updating and implementing recovery plans, requesting that management be removed and special administration.  Capital write-down measures concern the power to write down or convert to equity the capital instruments of a distressed institution that would otherwise be non-viable, either outside of or as part of a resolution. These powers are vested in the CBC .

text: 4 See Opinions

text: and

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

text: 5 Law on the resolution of credit and other institutions 2013 and 2014 (L.17(Ι)/2013, L.38(Ι)/2013, L.97(Ι)/2013 and L.90(I)/2014).

text: 6 Law on the establishment and operation of a deposit protection and resolution of credit and other institutions scheme (L.16(I) 2013).

text: 8 See

text: Article 23

text: A of the draft Law on credit institutions.  Regarding resolution measures, institutions that are failing or likely to fail and meet the other resolution conditions are put into resolution whereby: (a) their shares, ownership instruments, assets, rights or liabilities may be transferred to a purchaser; (b) their shares or other ownership instruments may be transferred to a bridge institution; (c) their assets, rights, or liabilities may be transferred to an asset management vehicle company; and/or (d) they may be subject to bail-in . Subject to Regulation (ΕU) No 806/2014 of the European Parliament and of the Council the CBC’s decision to place an institution into resolution or take other resolution action is subject to the prior approval of the Minister for Finance in cases where the decision has a direct fiscal impact or systemic implications . The CBC may require institutions to pay all operating expenditures and costs incurred during the performance of its responsibilities and powers, such as administrative and operating expenditures, the costs of legal and consultancy services and any outsourcing costs . 1.5 A resolution fund will be available in order to achieve resolution objectives. Under the draft Law on a deposit guarantee scheme, there will be a fund for the resolution of credit and other institutions (hereinafter the ‘resolution fund’), which is one of the funds managed under the scheme for deposit guarantee and resolution of credit and other institutions operating in Cyprus (hereinafter the ‘DGS’) . From 1 January 2016, the contributions that credit institutions established in Cyprus make to the resolution fund have been transferred to the Union’s single resolution fund in accordance with the provisions of the Agreement on transfer and mutualisation of contributions to the single resolution fund . The DGS, which is a separate legal entity, administers the resolution fund, the deposit guarantee fund for credit institutions and the deposit guarantee fund for credit cooperatives. The funds are managed by an independent commission of five members that includes the CBC Governor, who chairs the Commission, two CBC employees and two employees from the Ministry of Finance . The funds are financed by: (a) ordinary ex ante and extraordinary ex post contributions levied on institutions licensed in Cyprus; (b) loans or other types of financial support from credit institutions, financial institutions or other third parties, in the event that the amounts collected are not sufficient to cover losses and resolution costs; and (c) proceeds from sanctions and the liquidation of assets.

text: 10 Article 42 of the draft Law on resolution.

text: 11 Regulation (ΕU) No 806/2014 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: 12 Article 4 of the draft Law on resolution.

text: 13 Article 8 of the draft Law on resolution.

text: 14 Pursuant to

text: Article 4(1)

text: (b) of the draft Law on a deposit guarantee scheme, one of the DGS’ objectives is ‘financing through the Resolution Fund, the adoption of resolution measures as provided in this Law and the Law on resolution of credit and other institutions’. The Cypriot DGS was set up under the Law on the establishment and operation of a deposit protection and resolution of credit and other institutions scheme (L.16(I)/2013) and other related laws and regulations. For a summary description of the DGS see paragraph 1.4 of Opinion

text: . The draft Law on a deposit guarantee scheme aims to amend that legal framework in order to implement Directive

text: and Directive

text: in Cyprus. 1.6 In accordance with the ‘no creditor worse off’ principle, shareholders or creditors that have incurred greater losses in a resolution than they would have incurred in a winding-up under normal insolvency proceedings are entitled to the payment of the difference from the resolution fund . The CBC is required to undertake a separate independent assessment for this purpose as soon as possible after the resolution action is taken . 1.7 Procedural requirements ensure that resolution measures are properly notified and that the authorities involved in resolution and their staff are subject to a confidentiality regime. The CBC, as resolution authority, and other competent authorities are required to cooperate with each other. Additionally, all competent authorities involved in a resolution are required to provide one another, upon request, with all the relevant information to carry out their tasks. The CBC is authorised to impose administrative measures and administrative sanctions for violation of the draft Law on resolution and measures taken thereunder . 1.8 The liability of the CBC Governor, the Minister of Finance, the members of the CBC Board of Directors and CBC staff is limited to actions conducted in bad faith, gross negligence and wilful misconduct . The liability of the Board of Directors members and senior managers of entities that results from the application of resolution tools, e.g. a bridge institution or asset management company, as well as the liability of any other person authorised to act for the CBC under the draft Law on resolution, is also limited to gross negligence, bad faith and wilful misconduct .

text: 2. General observations

text: 2.1 The ECB welcomes the draft laws, as they strengthen the tools and procedures available to the CBC to carry out effective preventive measures, early intervention and effective resolution in line with the common framework of intervention powers, rules and procedures laid down in Directive

text: . 2.2 The ECB stresses, however, that it does not opine on whether the draft laws effectively implement Directive

text: and Directive

text: into Cypriot law. The ECB focuses instead on those provisions that may impact on the roles and tasks of the CBC as a central bank and as a member of the European System of Central Banks (ESCB), as well as those provisions that may impact the specific tasks conferred on the ECB by Council Regulation (ΕU) No 1024/2013 . 2.3 The ECB underlines that it has developed guidance, set out in paragraphs 2.5.1 to 2.5.3, on the basis of which it may decide whether a new task conferred on an ESCB national central bank (NCB) is to be considered a central banking task or a governmental task for the purposes of assessing such a conferral against the prohibition of monetary financing under Article 123 of the

text: 17 Article 77 of the draft Law on resolution.

text: 19 Article 108 of the draft Law on resolution.

text: 20 Article 111 of the draft Law on resolution.

text: 21 Article 112 of the draft Law on resolution. This limitation of liability continues to apply after the end of such an appointment or the accomplishment of such a task.

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). Treaty . This guidance applies to genuinely new tasks that either did not exist in the past or did not form an integral part of the central banking tasks previously assigned to the NCB. 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 substantive legislative amendments. 2.4 In this regard, the ECB notes that the CBC has had extensive powers to take specific resolution measures in relation to credit institutions since 2013 . The ECB also notes that the draft Law on a deposit guarantee scheme does not confer new tasks on CBC in connection with the operation of the deposit guarantee fund for credit institutions and the deposit guarantee fund for credit cooperatives. The draft Law on resolution extends the existing powers and responsibilities of the CBC as the resolution authority for credit institutions, and complements the CBC’s responsibilities by also designating it as the resolution authority for investment firms. Whilst the CBC has powerful tools to intervene in distressed financial institutions, such as credit institutions and credit cooperatives, which pose a risk to financial stability, principally in the form of a special administration regime, the draft Law on resolution extends the resolution tools, such as the bail-in, bridge institution and asset management vehicle tools, to investment firms. The draft Law on resolution should therefore be assessed in the light of the prohibition of monetary financing. 2.5 The concrete assessment of whether the CBC’s task of acting as a resolution authority for investment firms is to be considered a central banking task or a governmental task is then undertaken in paragraph 3.4 of this opinion. 2.5.1 General considerations First, 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. Second, 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. Third, new tasks conferred on an NCB that are atypical of an NCB’s 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 governmental tasks. In that context, a distinction should be drawn between the liquidity- and solvency-related tasks of NCBs. Whereas for the purposes of the prohibition of monetary financing, solvency support is a governmental task; liquidity-related tasks that have the ultimate objective of financing the economy are central banking tasks. 2.5.2 Specific considerations Resolution tasks can be considered central banking tasks, provided that they do not undermine an NCB’s independence in accordance with Article 130 of the Treaty. 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 governmental tasks . This is without prejudice to the possibility that: (a) central banks may provide short-term financing to deposit guarantee schemes

text: 23 See paragraph 2.3 of Opinion

text: 24 See Opinion

text: 25 See paragraph 2.3.2 of Opinion

text: . under certain conditions; and (b) NCBs may provide emergency liquidity assistance to solvent credit institutions. An important criterion for qualifying a new task as a governmental 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 fits into the institutional setup 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 Statute of the European System of Central Banks and of the European Central Bank. 2.5.3 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 governmental 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 Role of Minister for Finance in decision making on resolution The draft Law on resolution provides that subject to Regulation (ΕU) No 806/2014, the CBC’s decision to place an institution into resolution or take other resolution action is subject to the prior approval of the Minister for Finance in cases where the decision has a direct fiscal impact or systemic implications . The draft Law on resolution also stipulates that the CBC Board of Directors shall have the authority to exercise the responsibilities and powers of the resolution authority in

text: 26 See footnote 12. accordance with this Law and Regulation (ΕU) No 806/2014 . The ECB understands therefore that the Minister’s prior approval may only be required before the resolution authority takes a resolution action which has a direct fiscal impact or systemic implications and not when the Single Resolution Board takes a resolution decision in accordance with Regulation (ΕU) No 806/2014. Accordingly, national ministerial approval should in no event delay or hinder effective resolution action by the Single Resolution Board. 3.2 Topping up the funds managed under the DGS The draft Law on a deposit guarantee scheme provides that the funds can be financed through loans and other forms of financial support in the event that ordinary ex ante and extraordinary ex post contributions are not immediately accessible or sufficient . However, the draft Law on a deposit guarantee scheme does not further specify: (a) the financial institutions or the third parties that are allowed to provide financial support; (b) the nature of eligible financial support arrangements; or (c) the terms and conditions of any such arrangements. As the ECB has repeatedly stated in the past, in line with the prohibition of monetary financing, an NCB may not finance any resolution fund. Where an NCB acts as resolution authority, it should in no event assume or finance any obligation of either a bridge institution or asset management vehicle . In the same vein, any national legislation that provides for a deposit guarantee scheme to be financed by an ESCB NCB would only be compatible with the prohibition of monetary financing under Article 123 of the Treaty where certain restrictive conditions are met, i.e. such financing is short-term, it addresses urgent situations, systemic stability issues are at stake and decisions are made at the NCB’s discretion . The ECB expects these conditions to be fulfilled with regard to any potential involvement by the CBC in the alternative funding arrangements of the DGS. 3.3 Structural arrangements within the CBC to ensure operational independence and avoid conflicts of interests In observance of the principle of organisational autonomy, the CBC is expected to implement measures to ensure operational independence between the tasks related to crisis management and its other tasks as well as to establish mechanisms for cooperation and coordination between the different structures and authorities involved. 3.4 Conferral of new resolution tasks on the CBC In addition to expanding the CBC’s existing resolution powers in respect of credit institutions in line with Directive

text: , the draft Law on resolution designates the CBC as the resolution authority for investment firms, broadening its existing responsibilities so as to include the power to propose placing investment firms into resolution and to take resolution measures in respect of such entities. In the light of the guidance set out in paragraphs 2.5.1 to 2.5.3, it must be assessed

text: 28 See

text: Article 15

text: (b) of the draft Law on a deposit guarantee scheme. In the case of a group resolution, Article 13(2) of that draft law provides that the DGS may enter into loan agreements, or receive other forms of support from institutions or other third parties, or guarantee any loans entered into through financial arrangements at group level.

text: 29 See the ECB’s 2014 Convergence Report, p. 30.

text: 30 See the ECB’s 2014 Convergence Report, p. 30. See also paragraph 3.2 of Opinion

text: ; paragraph 4.1 of Opinion

text: ; paragraph 2.2 of Opinion

text: ; and paragraph 3.1.3 of Opinion

text: . whether the CBC’s new tasks and responsibilities in this field could constitute a breach of the prohibition of monetary financing. 3.4.1 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 respect the ECB notes that the provisions of the draft laws authorise the CBC in its capacity as a resolution authority to require institutions to pay all the operating expenditures and costs incurred during the performance of its responsibilities and powers in order to safeguard the CBC’s financial independence . 3.4.2 Links to tasks listed in

text: Article 127(2)

text: , (5) and (6) of the Treaty Administrative resolution tasks are considered tasks related to those referred to in Article 127(5) of the Treaty, based on the understanding that administrative resolution tasks and supervisory tasks complement each other. In the case of the extension of CBC’s responsibility to resolution tasks in respect of investment firms, such new tasks may also be considered related to tasks under Article 127(5) of the Treaty by analogy with the complementarity of the CBC’s resolution tasks in respect of credit institutions and credit cooperative institutions with that of its existing supervisory and financial stability tasks. 3.4.3 Atypical tasks A number of Member States have conferred on their NCBs a significant role in the resolution of credit and 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 new resolution tasks of the CBC in respect of investment firms can therefore be regarded as being tasks not atypical of a central bank, particularly if, as in the case of the CBC, it already had tools to intervene in distressed financial institutions that pose a risk to financial stability. 3.4.4 Discharge of tasks on behalf of and in the exclusive interest of the Government or of other public entities Whilst the CBC 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, it is required, before placing a credit or financial institution into resolution or taking other resolution action to obtain the prior approval of the Minister for Finance where the decision has a direct fiscal impact or systemic implications. This provision implements

text: Article 3(6) of Directive 2014/59/EU

text: and ensures that the CBC has ultimate control over any decision related to a resolution matter that could affect the CBC’s financial independence. There is no indication that

text: 31 See the ECB’s Convergence Report, 2014, p. 25.

text: 32 See Article 8 of the draft Law on resolution. 33 See paragraphs 2.1, 2.3 and paragraph 3.2.4 of Opinion

text: , paragraph 4.1 of Opinion

text: , paragraph 2.1 of Opinion

text: , paragraph 2.3 of Opinion

text: , paragraph 2.2 of Opinion

text: , and paragraph 2.2 of Opinion

text: . in discharging its resolution function the CBC acts exclusively in the interest of another public entity. 3.4.5 Extent to which conflict of interests with existing tasks are addressed Pursuant to existing law and the draft Law on resolution , the CBC will adopt and publish all the relevant internal rules in order to ensure that there is no conflict of interest and that the operational and organisational independence of the department carrying out resolution functions from the CBC’s other tasks is respected. The ECB expects the CBC’s internal rules to adequately address potential conflicts of interest between the resolution function and the CBC’s other tasks, particularly in connection with the resolution of credit institutions. With regard to the CBC’s resolution functions in respect of investment firms, conflicts of interest should be avoided when the Cyprus Securities and Exchange Commission is the supervisory authority for investment firms. 3.4.6 Extent to which the performance of tasks is proportionate to the CBC’s financial and operational capacity and its ability to perform its ESCB-related tasks The conferral of these tasks on the CBC raises questions concerning the operational capacity of the CBC. The CBC will need to ensure that there are the necessary resources, including adequate staff and skills, which are essential for the performance of its new functions as the resolution authority for investment firms. The CBC should ensure that its capacity to perform its ESCB-related tasks and existing supervisory functions will not be affected by the assumption of these new tasks. 3.4.7 Extent to which the performance of tasks involves substantial financial risks The draft Law on resolution provides that the liability of the CBC’s Governor, the Minister of Finance, the members of the CBC Board of Directors and CBC staff is limited to actions conducted in bad faith, gross negligence and to wilful misconduct. The draft Law on resolution, however, does not set out the CBC’s liability regime. This could result in financial risks for the CBC due to potential liability issues. The ECB considers that it would be useful to align the CBC’s liability regime with the liability regime relating to these individuals under the draft Law on resolution. 3.4.8 Conclusion The ECB considers that there are grounds for regarding the CBC’s expanded resolution tasks as central banking tasks, in the sense that they complement the CBC’s existing supervisory and resolution functions. The fact that the CBC may require institutions to pay all the operating expenditures and costs incurred during the performance of its responsibilities safeguards the CBC’s financial independence. However, the CBC will need to ensure that the extension of its tasks to cover the resolution of investment firms will not affect its capacity to perform its ESCBrelated and supervisory tasks and that there are adequate resources and staff for the performance of its new responsibilities. In addition, the CBC’s liability regime should be aligned with the liability regime of the Governor, the Minister of Finance, the members of the CBC Board of Directors and CBC staff in order to limit potential liability issues that could present financial risks for the CBC. 3.5 Cooperation and exchange of information between the resolution authority and other relevant authorities, including the Cyprus Securities and Exchange Commission. The draft Law on resolution provides for cooperation and the exchange of information between the CBC and the competent supervisory authorities, including the Cyprus Securities and Exchange Commission, in order to perform their respective tasks, each keeping in mind the impact of their performance on the other . The ECB welcomes these provisions as they will enable the relevant authorities to perform their statutory tasks in a coordinated fashion. 3.6 Resolution planning The draft Law on resolution stipulates that when the CBC evaluates resolution plans for specific institutions, it must not assume that extraordinary public financial support will be granted, other than the use of resources from the resolution fund. There shall be no assumption that general central bank emergency liquidity assistance or specific central bank liquidity assistance provided under non-standard collateralisation, tenor and interest rates terms will be granted . While this appears to be in line with the requirements of Directive

text: , the ECB emphasises that these provisions 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 operations and emergency liquidity assistance, within the limits imposed by the prohibition of monetary financing under the Treaty . 3.7 Establishment of a bridge institution Pursuant to the draft Law on resolution, the CBC approves a bridge institution’s (or asset management vehicle company’s) memorandum of association and articles of association, the appointment of the members of its management and supervisory bodies, their remuneration and any conferral of delegations, and may impose restrictions on its activity to ensure compliance with applicable legislation on State aid. In this respect, the ECB underlines that under Regulation (ΕU) No 1024/2013’s provisions on the ECB’s responsibilities with regard to the authorisation of a credit institution to be established in a participating Member State , the ECB is the only authority with the power to grant the banking licence necessary for the bridge institution to have access to the activity of credit institutions, irrespective of the context and the size of the institution which is being created. Additionally, if the bridge institution is not able to comply with the requirements for authorisation from the intended start of its operations, then the resolution authority shall request a temporary exemption from some or all of these requirements. As the competent authority, the ECB will assess the request and if it decides to grant such an authorisation, it will indicate the period for which the bridge institution is waived from complying with the relevant requirements .

text: 36 See

text: Article 84

text: Article 85(4)

text: to (5) and Article 89 of the draft Law on resolution. 37

text: Articles 10(3)

text: (b) and 18(1)(a) of the draft Law on resolution. 38 See paragraph 3.2 of Opinion

text: and paragraph 3.3 of Opinion

text: . 39 See Articles

text: and

text: of Regulation (EU) No 1024/2013. 40 See

text: Article 41(1) of Directive 2014/59/EU

text: . 3.8 Determination of failing or likely to fail The draft Law on resolution stipulates that the CBC, acting as resolution authority, will have to be consulted on the determination of whether an institution is failing or likely to fail in the event of the national competent authority (NCA) making a determination in line with the first alternative listed in

text: Article 32(1)

text: (a) of Directive

text: . Directive

text: assigns the failing or likely to fail assessment, as a rule, to the respective supervisory authority, i.e. the ECB or NCAs, in line with the distribution of competences under Regulation (ΕU) No 1024/2013. Additionally, pursuant to

text: Article 9(1)

text: Article 4(1)

text: (e) and

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

text: and

text: Article 104(1)

text: (b) of Directive

text: of the European Parliament and 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 these Union law requirements by significant institutions . According to

text: Article 18(1)

text: , read in conjunction with

text: Article 7(2)

text: , (4)(b) and (5) of

text: Regulation (EU) No 806/2014

text: , it is the ECB, after consulting the Single Resolution Board (SRB), which shall make the failure or likely to fail assessment for credit institutions falling within the competence of the SRB for the adoption of a resolution scheme from 1 January 2016. This opinion will be published on the ECB’s website. Done at Frankfurt am Main, 1 February 2016. [signed] The President of the ECB Mario DRAGHI

text: 41 See

text: Article 42(1)

text: (a) of the draft Law on resolution. 42 Directive

text: of 26 June 2013 of the European Parliament and of the Council 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. 138). 43 See paragraph 3.3 of Opinion